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Varied paths to financial independence

Staff Writer

Like many Americans, Gina Molinari wonders what she would do if she had $1 million.

Molinari, a Howell resident, said she would want to travel to places she has not been including Australia, southeast Asia, Italy, Greece and England, as well as take care of her family and friends in any way she could.

“I’d probably buy a house, but not a big house, and then I would take a one-year-long road tour and I would travel,” Molinari said. “I don’t think I would travel really lavishly.

“I would take care of the people I know who have always taken care of me that are struggling.”

Many like Molinari can take stock in their financial situation on May 20, which is dubbed National Be a Millionaire Day, an annual day aimed to honor people who desire to enjoy the power and freedom of financial security.

But for most, who are not millionaires, to achieve that stability will take a combination of hard work and extreme luck.

“You have to have a little luck; you have to come up with the right product or the right business,” said Gino Mallamaci, a Marlboro-based certified public accountant. “It’s not easy to be a millionaire. Ninety percent of the country makes under $200,000 a year.”

According to Mallamaci, overspending is the main mistake people make that prevents them from maximizing their wealth and achieving the millionaire goal.

“They bite off more than they should chew — they buy a house that they could barely afford,” he said. “They pay 20 percent of their balance with interest on their credit card.”

Mallamaci also said reliance on the stock market to gain wealth very rarely achieves the intended goal.

“The stock market goes up and down, and very few people make money on the stock market,” he said. “You know who makes money? The brokers.”

While it is exceedingly difficult to actually become a millionaire for most, Jackson native Andrew Oliverie said it is possible for the average American to become a millionaire if they were to make substantial changes to spending habits, including decreasing the amount of money spent on food, entertainment and technology.

“I think our society lives above our means,” Oliverie said. “Do you really need a smart phone with all that data? There are a lot of things we don’t need.

“If you want to be a millionaire, you have to make some sacrifices.”

Oceanport Councilman Joseph Irace, vice president and senior portfolio manager at Dreyfus Corp., said he has tried to teach his two daughters, who are ages 19 and 22, about balancing savings with discretionary spending.

“I’ve been telling her to make sure she starts some sort of savings plan like a 401k plan because that’s like free money,” he said about dealing with his oldest daughter. “It’s a nice way to get started without having to take money out of your account.

“Probably the toughest thing for anybody to learn when they are coming out of being dependent on their parents is your discretionary income. That’s the most difficult thing. You are coming out and you have money that you didn’t have before because now you have a job and the temptation is to spend your entire paycheck on food, clothes, drink and entertainment, and the hardest thing to do is to figure out what percentage of each you want to do.”

Irace said young people in particular should think long term when deciding how to allocate money between savings and discretionary funds.

“I try to impress upon my daughter that eventually you are going to want to buy a house, and if you have no money, obviously it will be that much harder to buy a place or even rent a place,” he said. “That being said, you don’t want to not have any entertainment dollars and you want to go out and hang out with your friends.

“So there is a happy medium and everybody has to figure out what’s best for them. You are going to have to take a deep breath and fight the temptation to spend your entire paycheck on fun stuff.”

Eric Saenz, a financial professional with AXA Advisors in Wall, said he suggests clients, particularly younger clients, develop a systematic approach to savings, and with that it would be possible to become a millionaire later on in life.

“People tend to live at or above their means,” he said. “If you’re making $60,000 or $70,000 for 20 or 30 years and you practice those types of habits, it’s hard not to become a millionaire.”

Saenz said despite the advice, many are not prepared for the short-term let alone the long-term.

“If you were to go on disability or you were to get fired from your job, how much savings do you have to allow you to sustain your living in the short-term?” Saenz said. “The rule of thumb is, anywhere between three and six months, and I would be curious to know how many people actually have it in their bank account.”

Mike Keller, a financial advisor with Provident Bank, said even adults can make changes to their spending habits to increase their wealth.

Keller said he recently did a case study on himself by removing his debit and credit cards from his wallet after filling his car with gas and attempting to live off of $50 in cash for the work week.

“Even at my age, I did a gut check and I took my credit cards and debit cards out of my wallet and I put $50 in cash in my wallet, and whatever I had in my wallet, that was all I used for the week,” he said.”Once that was gone, that was it and I noticed that was about a $400 difference for that month.

“We swipe, swipe, swipe, swipe, swipe and we don’t add it up.”

The dream of being a millionaire is still alive for many; however, as inflation rises, the value of what $1 million is worth is far different today than it was in the past.

“When I was 12 years old, $1 million was a lot of money, and now $1 million is probably not all that much money,” Molinari said. “If I had $1 million right now, it would probably last me for 20 years.”

Keller put into context exactly how much wealth can be derived from $1 million as opposed to years in the past.

“If you had $1 million in cash and you were very conservative and put it in something like an annuity fund, you are looking at $25,000 to $30,000 a year in interest,” he said. “Twenty years ago you were looking at maybe $80,000 to $90,000 or more.”

But still, many like to dream of what they would do if they were handed $1 million.

Melissa Genovese, Howell, said if given $1 million at 28 years old, she would invest a portion of it and use the rest to buy a new house and travel. However, she said her answer right out of college would have been different.

“I wouldn’t care as much about investing or saving for retirement, but I think the traveling and the house would have stayed the same,” Genovese said. “I don’t think I would have been smart enough to make those investment decisions yet.”


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