| Issue date: April 11, 1999
5
Money secrets of the rich & famous
They
know how to make money. They know how to spend money. But (surprise!)
many of their secrets are things you can do, too. Here are some
of the best.
James
Cramer,
TheStreet.com
The greatest deal on Earth, bar none, is to be a member of the
AAA [American Automobile Association]. They always show up, they
always do a good job and they always make your life easy. I can't
believe they exist and feel they could be heaven-sent. Especially
for the price. And I use them for all the other stuff, too, like
license transfers and TripTiks."
FAVORITE SPLURGE: "No. 4, supersized - McDonald's-speak [for
a double quarter-pound burger with cheese and extra-large fries
and drink], if you don't have kids."
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Michael
Eisner,
CEO, Walt Disney
My grandfather was an entirely self-made man who had shined shoes
on the streets of Washington, D.C., as a child, then worked his way
through college and Georgetown Law School. My grandfather's motto
is still the best advice I've heard: 'One way to make money is not
to spend it.' "
FAVORITE SPLURGE: "The Greek philosopher Theophrastus said, 'Time
is the most valuable thing a man can spend.' My most valuable investment
- and favorite splurge - is spending time with my wife and our three
sons."
Chuck
Schwab, chairman,
Charles Schwab & Co.
Before you even start to think about investing, take care of the
basics. Set aside an emergency fund in the event of an illness or
unemployment. Aim for
two months' living expenses. Put it somewhere that can be accessed
quickly and easily - and make sure it can be easily converted to
cash." Schwab also notes: "The biggest risk in investing is doing
nothing and watching inflation eat up your savings. Even at the
current low rates, inflation can whittle away a significant portion
of what you own if you never start an investing program."
No splurge.
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Peter
Lynch,
Fidelity Investments
A close friend set aside a large sum for his daughter's wedding.
Twelve months before the big day, he asked me to recommend an equity
[stock] fund where he could park the money. I asked: 'If you buy an
equity fund and the market drops between now and the wedding, will
you cancel the band, the drinks, the flowers or all three?' Simply
put: You have to know your situation and tailor a plan to fit both
your goals and your comfort level."
FAVORITE SPLURGE: "My wife and I just bought a farm in Ireland."
Susan
Lucci,
All My Children actress
When you see something you want, buy the very best thing the
first time. If you talk yourself out of it and buy something second-rate,
you'll never be satisfied, you'll always be disappointed, and you'll
end up buying twice. If you buy the best at the beginning, you'll
end up saving money."
FAVORITE SPLURGE: Extra-large bath towels (so you can wrap yourself
up in luxury!)"
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Late-start investing
 ere's a scary statistic, baby boomers: Most of you have saved less than $3,000 for retirement, according to a Merrill Lynch survey. That's a tiny sum, considering retirement may be just 15 years away. I found that nugget in a new book, The Late-Start Investor, by John F. Wasik (Owl Books, $14.95). He's not the only one onto this problem. Two other kick-in-the-pants tomes, Ginger Applegarth's Wake Up and Smell the Money (Viking, $23.95) and Kay Shirley's Baby Boomer Financial Wake-Up Call (Dearborn, $15.95), hit the shelves recently.
 Some tips from the authors:
Forget the past. You're 40 (or older) and haven't saved
a dime. Don't
give up, says financial planner Applegarth. "Even if you start late, the money you put away can grow into quite a nest egg." For example, save $2,000 by not choosing all the extravagant options on your next car. Invested in an IRA, tax-deferred,
at 11 percent, 20 years from now that would be worth $16,125.
Do an "amenities audit." Wasik, executive editor of Consumer's
Digest, suggests this as a way to see what you can do without.
Start with big-ticket items; refinance your mortgage to free up
cash to buy
a used car, not a new one.
Be greedy. "Boomers are self-indulgent," says financial
planner Shirley. "We don't save for something and then buy it. We
just buy and buy and then take pleasure in having." Instead, take
pride in the ballooning balance in your retirement accounts.
Reframe the question. Plan for
the retirement you envision actually living. Start a side business
five
years before you quit your day job, Applegarth suggests. Wasik says
to consider goals first, numbers
second. "Think: 'Do I want to move to Florida? Or do I want to start
a new career?' Then think: 'How much will that cost?' "
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Late-start investing