The income and wealth gap in this country and many others continues to expand. Take the necessary steps to make sure that you and your family are on the right side of the chasm.

Three Steps Toward Financial Freedom

Marc Lichtenfeld | Thursday, April 04, 2013

 
I was at a school function and had every reason to be depressed…
 
With kids in elementary and middle school, I was getting an earful from a teacher about everything that’s wrong with education in the school district.
 
Emphasis on standardized tests, teachers whose work and skill are given no respect and, most shocking of all, the administration insisting to this particular teacher that a nine out of 50 on his history exam is a passing grade (despite his vigorous protests). In other words, a kid who filled out A for every answer of this multiple choice test would pass the course.
 
This is going on all over the country. We’re failing our kids, graduating young men and women who are not prepared for the real world.
 
But just as I was feeling pretty awful about the situation, I turned and walked into the exhibit hall. There, several hundred high school kids were up against each other in a robotics competition. These kids were smart. They were motivated. They were boys, girls, black, white, Hispanic and every other race and ethnicity you can think of. They were competing hard against one another, but having a party with each other at the same time.
 
Massachusetts Institute of Technology (MIT) was in the hall recruiting. So were Washington University in St. Louis and the U.S. Army. The army wasn’t there looking for infantry. It was hoping to nab some of the country’s brightest young engineers and technologists.
 
Seeing so many intelligent ambitious kids made me optimistic about the future — but it also got me thinking about differences in “the haves” and “the have-nots.”
 
In terms of education, these kids were clearly the haves. Not because they came from great schools — some of them didn’t. They were the haves because either a parent or teacher pushed them to grab the opportunities in front of them, or because they were self-motivated. Likely, a combination of the two.
 
Financially, in the United States, the gap between the haves and have-nots has widened significantly over the years.
 
According to the Spectrem Group, there are 8.99 million households in the United States worth at least $1 million, up 300,000 in 2012 due mostly to the stock market.
 
Unfortunately, Americans receiving food stamp assistance is at record levels at 47.8 million.
 
Former Florida Governor Jeb Bush recently told MSNBC, “We’re no longer socially mobile as a country,” and “You have people that are born poor and there’s a higher and higher probability that they’re going to stay poor. And you have people that are born rich and there’s a greater probability that they’ll stay rich.”
 
Life isn’t always fair. Sometimes you don’t get that deserved promotion, or an injury or accident hurts your ability to generate income. But if you’re motivated, there are still ways you can ensure your family is among the haves. And you don’t need a ton of money to start.
 
Here are three simple steps to get you underway:

1. Live below your means and start early
Pretty obvious advice here, but by God it works.

And don’t tell me it’s impossible. When I graduated college, I lived in Manhattan while making $18,000 a year and saved money from every paycheck. While friends of mine were living in high-rises with doormen, I shared a room with a friend in a nasty walk-up apartment. I contributed to a 401(k), had enough for pizza and beer (admittedly, it was bad, cheap beer) and put a few bucks away that I invested and turned into a few more bucks.

Saving and investing money for the past few decades has created a portfolio larger than anything I could have imagined when I was fighting off roaches the size of dachshunds in my New York apartment.

2. Make the right investments
My favorite is dividend stocks. But not just stocks with high yields. I’m more concerned with dividend growth. Here’s a perfect example of why:

This week, Barron’s reported that from 2007 to 2012, the dividends of the S&P 500 grew 14% while inflation totaled 12%. In other words, today, you need $1.12 to buy $1′s worth of 2007 goods. If you received $1′s worth of dividends from S&P 500 stocks in 2007, today you’d get $1.14, so you’re ahead of the game.

Owning Perpetual Dividend Raisers (companies that raise their dividends every year) is the best way, in my opinion, to increase your buying power over time. Whether you take the income today or are saving for decades from now, these stocks ensure you’ll have more money in your pocket that you need to keep up with inflation.

3. Learn as much as you can
There are so many good books and resources out there for investors.

If you’re new to the markets, my favorite book is Understanding Wall Street by Jeffrey Little. This book goes into the basics of what a stock, bond, option and ETF are. If you’re new to investing, I can’t recommend it highly enough.

The Little Book that Beats the Market by Joel Greenblatt is a terrific resource on value investing.

If you like the dividend growth method I mentioned above, Get Rich With Dividends is for you. Written by an author with one of the most insightful investing minds of the past 100 years (OK, it’s me), Get Rich With Dividends shows you exactly how you can generate significant income or wealth by investing in these conservative dividend-paying stocks.

Even if you’re behind, it’s not too late to ensure that in the future you’re a “have” instead of a “have-not.” The income and wealth gap in this country and many others continues to expand. Take the necessary steps to make sure that you and your family are on the right side of the chasm.

Marc Lichtenfeld is a senior analyst at Investment U.

- See more at: http://www.hcplive.com/physicians-money-digest/personal-finance/three-steps-toward-financial-freedom-iu/P-2#sthash.PKnShqWS.dpuf