How To Squeak By On $5 Million

Still life of stacks of one hundred US dollars
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Would your financial worries be solved if you just had more money -- say, $1 million?

Maybe. But according to a recent study by the folks at UBS (UBS), even millionaires -- multimillionaires, in fact -- fret over things like making ends meet and having enough to achieve their life goals.

The news from Wealthville is rather surprising. Researchers found that only 31 percent of millionaires consider themselves wealthy. Even among those with $5 million or more, only 64 percent of them are confident that they'll meet their own goals.

For anyone having a hard time making ends meet on their income -- no matter whether you're in the middle class or the upper class (or extreme upper, upper class) -- there are ways that you can improve your financial condition.

Don't Let Your Cash Sit Around and Languish
Whether you have $5,000 or $5 million in the bank, it's important to think sensibly about your cash.

It makes sense to keep some of your assets in cash, especially in the form of an emergency fund. But according to the UBS study, at least 47 percent of those surveyed say that "It's important to me to have cash because that's money I know I am extremely unlikely to lose."

Whoa, back up. That's dangerous thinking that shows these folks haven't considered the effect of inflation.

%VIRTUAL-article-sponsoredlinks%While the conventional way to think of inflation is as an increase in prices over time, the smarter way to think about it is that inflation is the erosion of your purchasing power over time -- historically, about 3 percent annually.

Here's what that means: If you sock away $1,000 for 20 years during which inflation averages 3 percent, it will end up only able to buy you $554 worth of things (in today's dollars). To have $1,000 worth of buying power in 20 years, you'll need to sock away about $1,800. (Play around with different scenarios with this inflation calculator.)

So while nearly half of those surveyed see cash as a risk reducer (that preserves their wealth), they're actually exposing their money to even more risk (shrinking over time). The lesson for all is this: Don't keep much more than you need to in cash. Instead, seek out long-term wealth-growing assets.

Smart Saving/Spending Strategies for All Walks of Life
Too many people have not saved enough for retirement, and even those with a million dollars socked away may be in for a rude awakening. Fortunately, even if a million dollars (or $10 million, depending on your goals) seems far away, you can get closer to it, or even surpass it, with a little planning. Here are some strategies that can be put into play no matter what income level you're at:
  • Live below your means. If your $4.5 million mortgage on your $5 million home is costing you around $30,000 per month when you bring in just $35,000 per month, you're cutting it way too close. It's the same with a $2,000 monthly obligation, if that has you living paycheck to paycheck.
  • Funnel your raises or bonuses into savings instead of spending them. So if your salary goes from $2 million annually to $2.4 million, put that $400,000 into savings and investments. (And, OK, even if your raise or bonus this year amounts to "just" $4,000, save that, too. Small sums can add up and be quite powerful over time.)
  • Rein in your spending. You don't have to resort to making salads from yard trimmings, but by cutting out three fancy $4 coffees each week, you can save $624 in a year. Cut out a daily $6 pack of cigarettes and you're looking at an extra $2,200 per year! Thinking about buying a $1.5 million yacht? Consider whether an $800,000 one will do. You can do a lot with that $700,000 difference.
  • Boost your total savings. You can do this in several ways. You might, for example, take on a second job, even for just a year. Ten extra hours per week earning just $15 per hour will amount to $7,800. If you're able to collect $450 per hour, as some lawyers and others do, you're looking at an additional $234,000! You might also work at your one job for a few more years than you originally planned. That can deliver several years of significant income, while permitting you to delay tapping your retirement savings, too.
  • Be smart and strategic. If you're not contributing to an IRA, look into doing so. If your employer matches your 401(k) contributions, take maximum advantage of that.
It's hard to believe that anyone with millions in net worth feels financially insecure, but that seems to be the case. The good news is that we can all make ourselves more secure.

Motley Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

6 Millionaires Who Lost It All, but Came Back
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How To Squeak By On $5 Million

Who he is: Co-founder of Curves International

How he lost his money: In 1976, Heavin dropped out of college at age 20 and started his first gym, Women's World of Fitness. Success came right away, and he was a millionaire by age 25. However, Heavin's aggressive expansion plans didn't add up. He added amenities to the gym, such as tanning beds and swimming pools, that were expensive to maintain. "At 25, it was all about me, and that's a foundation for disaster," Heavin told Kiplinger. By 1986, overhead costs began to exceed the amount the company was bringing in from new memberships, and at age 30 his business went bankrupt.

How he came back: Tried again with the same business idea, applying lessons learned from his initial failure.

Marrying his future business partner, Diane, gave Heavin the motivation he needed to give entrepreneurship a second try. In 1992, the couple opened the first Curves, a women-only gym, in Harlingen, Texas. Heavin once again found immediate success. In 1995, the pair turned the business into a franchise; today, there are 10,000 Curves locations across the world. In 2000, he released his first book, "Permanent Results without Permanent Dieting: The Curves for Women Weight Loss Method," and it became a New York Times bestseller. On finding success a second time around, Heavin says, "I had to lose everything I owned before I was capable of running a business the right way." Today, he's a billionaire.

Who he is: Entrepreneur, author, founder and former CEO of the debt-collection firm Commercial Financial Services (CFS)

How he lost his money: In 1998, Bartmann, a one-time billionaire, was forced to shut down CFS and file for bankruptcy. He and his business partner, Jay Jones, were charged with accounting fraud and conspiracy for allegedly inflating sales reports to ratings agencies. "We were doing so well, and then one afternoon it was all over," Bartmann told Kiplinger. Jones was convicted; Bartmann was cleared of any wrongdoing.

How he came back: Wrote books about his lessons learned.

After his acquittal in 2003, he slowly started to piece his life back together. In 2005, he wrote his first book, "Billionaire Secrets to Success." Bartmann followed up with "Bailout Riches" in 2009, which became a bestseller on Amazon. In July 2010, he returned to the debt-collection business and launched a new version of his former company, calling it CFS II.

CFS II took in $10 million in revenue last year. When asked how his previous ordeal helped shape how he runs CFS II, Bartmann told Kiplinger, "I'd be remiss in my duties if I assumed everyone is doing a great job . . . Don't walk away from your ability to supervise a relationship just because you like someone as a person."

Who she is: Olympic gold medal figure skater and television personality

How she lost her money: At the height of her career in the 1980s, Hamill was reportedly raking in $1 million a year to skate in prime-time TV specials. However, after years of excessive spending, which included a weakness for expensive jewelry, and a series of bad investments, including the purchase of the fledgling Ice Capades franchise, Hamill had to file for bankruptcy in 1996.

How she came back: Parlayed her strong brand into related new opportunities.

Hamill toured the professional ice skating circuit for several years to help pay off her debt. She also returned to television, appearing in the 1998 NBC special "The Christmas Angel: A Story on Ice." In October 2007, her autobiography, "A Skating Life: My Story," hit bookstores and made the New York Times bestseller list. That same year, she appeared in "Blades of Glory," an ice skating parody film starring comedian Will Ferrell. Recently, Hamill has found herself back in the spotlight as a contestant on season 16 of ABC's "Dancing With the Stars." She also continues to perform in professional ice skating shows and is currently on tour with "Stars on Ice."

Who he is: Grammy award-winning rap artist and television personality

How he lost his money: At the height of his fame in the late 1980s and early 1990s, Hammer's net worth was valued at around $33 million. However, he was reportedly spending $500,000 a month on his 200-person staff. Other costly expenses included the mortgage on his $10 million mansion, the maintenance and upkeep on 17 luxury cars, and the acquisition and care of 21 racehorses. When Hammer eventually filed chapter 11 in 1996, he claimed $1 million in assets and $10 million in debt.

How he came back: Reinvented himself.

After his superstar status faded, Hammer became an entrepreneur. He created a handful of record labels, has dabbled in tech start-ups and is currently the CEO of Alchemist Management, a Los Angeles-based athlete management and marketing firm specializing in mixed-martial-arts fighters. Hammer, who has more than three million followers on Twitter, often lectures about social media and marketing at business schools, including Stanford University and Harvard University. In 2009, he produced his own reality TV show on A&E, called "Hammertime," and he performed at the 2012 American Music Awards, as well as on ABC's "New Year's Rocking Eve 2013."

Who he is: Emmy-winning broadcast journalist and former host of CNN's "Larry King Live"

How he lost his money: During his early days in radio in the 1960s, King's low-level salary didn't support his big spending habits, including a fondness for gambling. By 1978, he had to file for bankruptcy after accumulating more than $350,000 in debt.

How he came back: Capitalized on early opportunities in an emerging industry -- cable TV.

The same year that he declared bankruptcy, King was hired by WIOD Radio in Miami to host a national nighttime talk show that eventually caught the attention of CNN founder Ted Turner. In 1985, Turner hired him to host his own television show, "Larry King Live." King would host the cable show for 25 years, making as much as $10 million a year before signing off for good in 2010.

Who he is: Entrepreneur and founder of Famous Amos cookies

How he lost his money: Amos started a cookie business after deciding to leave his cushy job as a talent manager for the William Morris Agency in New York in 1975. By the early 1980s, Famous Amos hit $12 million in sales. However, his ego and lack of business acumen eventually brought the company down.

How he came back: Despite hitting hard times, Amos's entrepreneurial spirit never died. In 1993, he founded Uncle Noname Cookie Company (he'd lost the right to use "Famous Amos" as the result of his earlier failure), and in 1995 he changed it to Uncle Wally's, with a focus on muffins. Last year, Amos returned to his roots with the launch of Wamos Cookies. When discussing how to become a successful entrepreneur and stay that way, he told Kiplinger, "You can't be profitable unless you have a team that's working as a unit. I learned that lesson from losing Famous Amos."
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