According to Wiktionary.org, the American Dream is defined as: a philosophy that with hard work, courage, and determination, anyone can prosper and achieve success. This definition quantifies exactly how we both feel about life.  Unfortunately, the television constantly berates us and gives us all of the reasons that the American Dream is dead.

Why do we stand for this?  Why do we allow them to tell us that this is the case?  Who is to tell you that you are unable to go out, start your own business, or follow your dreams and become a success?  Personally, it irritates us when people tell us that!  As young professionals in today’s society, we have all the opportunity in the world to pursue our dreams, and now we must take the time to learn how to do it.

How do you handle your money?

One problem that we see that prevents people from pursuing their dreams is an incorrect view of how they handle money.  We have this tendency to live our professional lives, social lives, and personal lives all within one place.  That is great, because often our professional associates become our social friends, which in turn become a part of our personal lives.  For some reason though, we have another tendency to handle our finances WAY out in right field; somewhere that has no interaction with our personal or professional ambitions.

Take the average person, for example; how are they planning for their retirement?  Investing in a 401(k).  Obviously the 401(k) is not going to be adequate, but nonetheless, we continue to save money in it every month with no regard for where it is going, how it is managed, or what it will ultimately do for us.  However, the 401(k) has some severe disadvantages!  Namely, the money inside of it cannot be accessed until nearly age 60!*  The problem that poses is that if we only save money into our 401(k) (or other similar retirement program) then we are locking up our money and losing the ability to employ that wealth for other purposes!

What is your dream?

Let us say, for instance, that you have a dream to open a clothing store.  Chances are, you will not open one right out of school; you will probably work for a clothing company for a few years until you think that you have enough experience and have learned enough to open up your own store.  After you worked there a while, moved up in the ranks, and feel ready to open your own store, what do you do now?  Where are you going to get the money to start your store?  If you quit working for your company, where are you going to get the income to live off of while you get your business started?  A business loan?  Maybe, if you can find one.  To get a loan though, a bank will not only want to see a business plan, but they will want to see that you have some collateral, as well.  Part of that business plan will include how to obtain customers, marketing, and cash flow projections.  How can you project a cash flow if you have not any money to invest in marketing?  What happens if there is a credit freeze like is happening currently?  Banks just do not lend money that easily during uncertain economic times!

Of course, none of this is to discourage you, but to emphasize that it is absolutely necessary to make sure you have a source of your own capital!  Too many people are afraid to venture out, take a risk, and follow their dreams because they do not have any money on which to live off of while they are getting their dreams off the ground.  So in essence, for many people the American Dream is gone. However, it does not have to be for you.

Recap

We have taken you through budgeting, debt depletion, and handling your insurance coverages, all in an attempt to get you to become proactive with your financial situation.  As we begin talking about wealth building, instead of keeping your money way out in right field, we want you to become proactive with managing your wealth in the same sphere as you manage your personal and professional ambitions.  If you know that in the future you may want to start using your money to buy rental properties, start your own business, or other similar purpose, then make sure you are managing your money with those goals in mind.

So step one in the wealth building process is to open a savings account (if you do not have one) and regularly contribute to it.  Joe and I advocate starting one that is not easily accessed with a point and a click on the internet (like a money-market with NO check-writing privileges).  If you need the money it is there (without penalties), but because it is “locked up” it is not really easily accessed.

When it comes to a successful financial strategy, liquidity is your greatest ally, so make sure that liquidity is on your side first!

*Note, a person might be able to access the money through loans, but not always.  Furthermore, if you withdraw money out of a 401(k) prior to age 59 1/2, taxes and penalties must be paid.  There are also a few reasons that the IRS regularly allows withdrawals, but they are special cases (disability, hardship withdrawals, etc).