Many successful investors, by society's standards, are boring people.

They don't job hop.

They marry once.

They have two kids, not five or six.

They stay put in the same house for long stretches of time.

They buy and hold the same investments for five years or more.

Boring, right?

Yes, the typical millionaire investor's life may lack a certain variety. But variety, while perhaps the spice of life, is poison to building wealth. Variety breeds change. Change breeds uncertainty. Uncertainly breeds inconsistency. And inconsistency is the bane of investing.

On the other hand, boring breeds stability. Stability breeds consistency.

Consistency creates wealth.

Millionaire investors limit shocks to their finances. They create stable lifestyles. They develop stable and predictable cash flows and expenses. They limit events and activities that inject uncertainty into their financial situations.

Successful investors invest consistently for 20 years or more. That's how you get to seven figures — investing consistently, month after month after month after month.

Successful investors invest month in, month out because the money is there to invest. Why? Because successful investors don't take on greater financial demands as their income levels increase. Successful investors don't buy more expensive homes every five years.

Successful investors don't buy more expensive cars every two years. Successful investors don't change jobs — and therefore end up low man or woman on the seniority pole — every three years. Successful investors know what comes in each month and what goes out and what's left for investing.

Most people's financial situations are in constant flux. Much of this uncertainty is self-inflicted. People change jobs frequently and are in a constant state of job insecurity because they're the new guy or girl. People take on debt to buy expensive toys. Most people constantly change how much money is coming in and how much is going out and how much, if there is any, to invest.

If you take nothing else away from this article, take the following: Interruptions kill financial plans. You don't get to seven figures investing two months and taking five months off because of a job change. You don't get to seven figures taking three years off from your investment program because you bought a house you can't afford. You don't get to seven figures taking eight years off from investing to pay college tuitions.

Interruptions rob your portfolio of time and compounding. When building a seven-figure portfolio, every month counts. You cannot afford to waste time. It's a cliché, but it's true — time is money, especially to your investments.

Recognize the Shocks

Life is full of surprises. You cannot shield yourself completely from all shocks. In some ways, some shocks, such as children, add to life's richness. Still, I can't think of any of life's major decisions that don't have a big financial component. Recognizing the financial implications of your decisions may help you frame the decision-making process a bit differently.

What are shocks that have the biggest impact on your investments?

Divorce. Divorce is a huge shock to your finances. Forget about being able to maintain an investment program during and usually after divorce. That's the least of your problems. Much bigger issues loom:

		Where can I afford to live?
		What kind of tax hit will I take when we sell the stocks, bonds, house, etc.?
		What will I do about health insurance for the kids?
		Will I have to reenter the job market?

It's an understatement to say that divorce is an extremely costly proposition, emotionally and financially. And the biggest financial hardship of divorce usually falls on women. A 1996 Study by the Social Science Research Council in New York City found that one year after a divorce, a woman's standard of living falls about 30 percent on average.

Divorce is so hard on finances because two households must now be supported instead of one. Divorce reduces the economies of scale that exist in families. In short, divorce injects a huge amount of uncertainty into someone's financial situation. Given that roughly half of all marriages end in divorce, it's not surprising that the vast majority of Americans never reach their financial goals.

Understand that I'm not making moral judgments about divorce. I'm not suggesting that you should or shouldn't stay in what you believe is a bad marriage. I am saying that your finances will feel the shock of divorce, and that shock will have lasting ramifications.

Job-hopping. It's estimated that the average graduate from high school or college will have 13 different employers during his or her working life, or a new one every 3 years or so. Frequent job-hopping creates a variety of shocks to your finances:

		A new job may cause you to curtail a regular investment program until you get a better handle on your new monthly cash flows.
		You may be insecure about your new post. Insecurity could cause you to back off your investment program until you see how the new job pans out.
		A new job may mean foregoing retirement benefits at your old job. If people are changing jobs on average once every three or four years, chances are they are not sticking around long enough to be fully vested in the company profit sharing/pension plan. At many companies, full vesting of a retirement program, such as a 401(k) plan, takes five years or more. That means every job change leaves retirement money on the table.
		Frequent job-hopping, and the accompanying need to transport the 401(k) money from your old employer to either your new employer's plan or a self-directed IRA, increases the likelihood that you'll spend the money rather than find it a new tax-deferred home. According to the Washington-based Employee Benefit Research Institute, when they leave a job, about 70 percent of Americans remove the funds from their tax-sheltered status. Raiding your 401(k) when you change jobs not only interrupts your investment program but exposes you to potentially steep taxes and penalties.
		Some companies do not permit new hires to join the pension program in their first year of service. Delaying contributions to a 401(k) plan for a year or more until you're eligible has an adverse effect on long-term results. Even worse, your new employer may not even offer a 401(k) plan, which eliminates you from participating in the best investment vehicle around.
		Job-hopping, depending on the location of the new job, may also mean a new home, which leads to yet another potential shock to your finances.
		A new job may require you to move to an area of the country with a much higher standard of living.

Some people make job-hopping work to their advantage. Their salaries increase sharply. They accrue more stock options. Nevertheless, when evaluating a new job, remember that a number of opportunity costs need to be considered.

Children. Don't get me wrong. I'm not advocating zero population growth. And there's no disputing the fact that children are truly a blessing. But there's also no denying the fact that kids cost money. Lots of it.
Diapers.

Bottles.

Shoes.

Food.

Soccer.

Compact discs.

Dance lessons.

Braces.

Glasses.

Textbooks.

Gas money.

Auto insurance.

College tuition.

Wedding.

Graduate school.

A loan for a starter home.

Gifts for the grandkids.

And on . . . .and on . . . and on . . .

According to a U.S. Department of Agriculture 1998 survey, you'll spend an average of $5,170 on a child for the first two years of his/her life. And it only goes up from there. According to the same survey, you'll spend nearly $7,000 for a child from ages 15 to 17. By some estimates, a baby born today will cost parents about $104,000 by age 17 and $600,000 (including schooling and wedding) by the time he or she reaches age 25.

$600,000. And that's after-tax dollars.

And if you have four or five children . . . well, building a seven-figure portfolio becomes extremely difficult.

Keep in mind that the out-of-pocket cost is only part of the real cost of raising a kid. Think how much that money you spend on Biff or Buffie would grow if invested. Let's say, on average, you spend $6,000 per year on a child for the first 20 years. Keep in mind that your kid won't get anywhere near Harvard Square for that kind of money, but let's be conservative. Had you invested that $6,000 per year for 20 years and earned 11 percent per year on your money, your investment would grow to approximately $430,000.

Obviously, I'm not suggesting your kids are financial black holes. The ugly truth, however, is that kids limit your ability to build financial wealth.

A new home. I recently purchased a new home. I needed more space and found a home I truly love. Unfortunately, my new home cost a bit more than my previous home. That's not unusual. Most home purchases are "move up" rather than "move down." What I'm discovering, however, is that I've become a bit more cautious with my monthly investment program until I get a better handle on the costs I'll incur with my new home. It's not just the bigger monthly mortgage payment.

What will my new utility expenses be?

What other overhead expenses will I incur with this new home?

How stable are the property taxes in my new area?

Buying a new home is stepping into the great unknown. (Have you ever seen the movie, The Money Pit?) Financial shocks come fast and furious. New roofs. Finished basements. New furniture. Indeed, a new home is the quintessential example of the "negative compounding" that takes place with big-ticket purchases. Simply put, a new home leads to a lot of new expenses.

And don't kid yourself that your new home represents an excellent investment. Home values, except for select areas of the country, haven't come close to matching the appreciation of stocks over the last two decades. Don't think you'll get a big return on your home expenditures. Given the demographic shift that's occurring in this country, demand for single-family homes is likely to decline as Baby Boomers downscale their housing needs. Most home owners will be lucky if their homes appreciate 4-5 percent per year over the next 20 years. In fact, I wouldn't be surprised if home values are flat to lower in many parts of the country over the next decade.

Medical/Long-Term Care Costs. According to a 1998 Merrill Lynch survey, only about half of current pre-retirees feel "extremely" or "somewhat" prepared to meet the costs of long-term care. This percentage is actually lower than a decade ago.

More than 40 percent of individuals turning 65 years old will spend some time in a long-term care facility. One in five will spend five years or longer in a nursing home.

You should be concerned about long-term care costs. They can be huge. Today, nursing-home care can cost more than $80,000 per year. Medical bills can be huge as well. Even with adequate insurance, a serious malady could cost you thousands of dollars. According to the National Council of Aging, long-term care expenses drive about 70 percent of senior-citizen families into federal poverty levels within four months of beginning institutionalized care.

I know there isn't much you can do to avoid many illnesses. But let's face it — we could do a lot more to improve our general health.

We don't exercise enough.

We don't eat right.

We don't get enough rest.

We are too stressed out.

We don't make being healthy a priority in our lives until it's too late.

Now, yes, you could do all of these things, and it still may not make a difference. But smart people play the percentages. And the percentages say that taking care of yourself physically and mentally should translate into a longer and healthier life.

Besides making a healthier you a priority, here are some other items to consider:

		Most Americans are woefully underinsured when it comes to disability. Unfortunately, after age 40, your likelihood of becoming disabled is three times greater than the likelihood of death. If you have no disability insurance, you are making a big mistake.
		When choosing a new employer, make sure the health insurance coverage is adequate for you and your family. Chasing a bigger salary, but a salary that comes with lousy insurance, may be penny-wise but pound-foolish in the end.
		Consider a long-term care policy, also known as nursing home insurance. When comparing policies, Dean Davis, a vice president at A.G. Edwards, suggests you consider the following items: 1) Home health-care option. The policy should provide some benefit in case you want care given in your home. 2) Inflation protection. According to the National Center for Health Statistics, the average age that someone enters a nursing home is 79. You'll probably buy long-term care insurance in your 50s or 60s. The cost of nursing homes can escalate between the time you buy the insurance and when you actually need it. Make sure the policy has some protection against inflation. 3) A reasonable daily benefit. The average cost of nursing homes ranges from $95 to $200 per day. Your long-term care policy should offer a daily benefit that at least matches the high end of these averages. 4) An acceptable benefit period. Since the average stay in a nursing home is 2 _ years, your benefit period should cover at least three years. 5) A reasonable "elimination" period. An elimination period is the time period when you pay for care out of your own pocket. A typical elimination period is 90 days. 6) A solid insurer. Don't necessarily jump at the cheapest long-term care policy. The insurance company backing the policy could be financially weak. How can you assess the financial strength of insurers? Check out the insurers' ratings with the major ratings services, such as A.M. Best (www.ambest.com) and Moody's (www.moodys.com).

Caring for parents, adult children, grandchildren. Many households are crowded these days.

It's not unusual for parents to be caring for adult children. It's not unusual for parents to be caring for their parents. It's not even unusual for grandparents to be caring for grandchildren. Indeed, according to the Census Bureau, some four million grandparents live with and care for grandchildren under age 18. That number is up 77 percent since 1970. More than 5 percent of all children live in such situations.

The upshot is that once kids leave home, they may not be gone forever. And with people living longer, don't assume your parents won't need financial assistance at some point.

How do you protect yourself from these shocks?

		Teach your children and their children about investing. If you turn youngsters on to investing, you will change their lives. You will set them on a path to financial independence that will make it less likely that your assistance will be needed down the road. You can have a huge impact on your children's financial IQ. Indeed, more than two-thirds of our everyday millionaire investors said that their parents were either "important" or "very important" in developing their discipline and expertise in investing. One thing is certain — kids need your help when it comes to investing. According to a 1997 survey of U.S. high school students, only 14 percent of the respondents correctly chose stocks as the best investment for long-term growth.
		Equip your children with the best education possible. Education levels correlate strongly with future earnings potential. According to the Digest of Education Statistics (1996), the median annual income of a worker with a bachelor's degree is 56 percent more than one with a high-school diploma; a worker with a master's degree has a median annual income nearly double that of a worker with a high-school diploma.
		Instill in your children and their children the importance of values. Integrity. Honesty. Lawfulness. I know this is much easier said than done. Still, many of today's households are affected dramatically by divorce, teen pregnancy, child abuse, and incarceration of the parents. If you cut down on these problems, you cut down on the likelihood that you'll be caring for children and grandchildren during retirement.
		Explore long-term care insurance options with your parents and grandparents before such insurance is needed. I'm uncomfortable saying this, but it's true — protecting your parents' and grandparents' wealth protects your inheritance. And given the paltry savings rate in this country — according to a recent telephone poll conducted by Strong Funds, nearly 18 percent of respondents said they save nothing — it seems an awful lot of people are banking on an inheritance to bail them out.

Lawsuits. The unfortunate truth is that the more wealth you create, the more prone you are to a lawsuit.

Don't think it can't happen to you. All it takes is one ill-advised right turn. Or a few too many drinks by one of your party guests who drives when he shouldn't.

Your life could change in an instant.

Accidents happen. Unfortunately, someone often pays dearly when accidents occur.

That person could be you.

A major judgment against you could undo decades of wealth building. Fortunately, you can protect yourself to some extent from such calamity. It's called "umbrella insurance."

An umbrella insurance policy picks up where your traditional homeowner's and auto insurance policies end. Umbrella insurance is cheap. You should be able to purchase a $1 million umbrella policy for about $20 per month.

If you have accumulated any wealth, you owe it to yourself to look into an umbrella insurance policy. I'm not a big insurance guy. But this is one insurance policy that you can't afford not to have.

Conclusion

It is possible to absorb shocks to your finances and still build a seven-figure portfolio. But the task will be much more difficult. Successful investors know the dangers of financial shocks and do their best to avoid or limit them.

You should do the same.

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