So Easy to be Rich
©2015 C. Henry Martens
“Whaaaaaaaaaat?!?! What do you MEAN, so easy to be rich?”
Well, I mean it is easy to be rich. Not by winning the lottery but by becoming wealthy by intentional effort. I know, I know… the common perception is that becoming wealthy is difficult. Well, not really. It is uncommon but not difficult.
Now lean in close, and I’ll tell you how to do it.
First off, let’s define some assumptions. Let’s assume I am speaking to a young person at the beginning of their earning years. All of this will apply to older people as well, but depending on age and income, not as much. So that is the first lesson… start early.
Listen, this can get away from you. Just like a physical ability, basketball, competitive running, ballroom dancing, you can tell yourself, “I could do that,” and yet you don’t. The years pile up, one on top of the other, and all of a sudden you realize that winning Dancing with the Stars will never be in your future. So no matter what age you are, if you want to be in better shape next year, the time to start is NOW.
Don’t be discouraged. This is going to be easy, remember? Now that you understand the immediacy of beginning, the next step is one often missed by financial advisors. This is the most difficult and yet most critical part of the process. Make a decision to start. RIGHT NOW! DO IT! Just like quitting smoking, you can’t be successful until you make “The Decision.” Once you REALLY make the decision, you are a non-smoker. Everything before was just practice. Until you make the decision to begin a task, it is all fantasy.
I know, you are probably saying to yourself, “Well, let’s just see what else he has to say first. Then I’ll decide.” That’s fine, too. It is said that caution is a virtue, and it is, as long as it doesn’t keep you from making the decision before it is too late. If you never become wealthy, then you put off the decision. Oh… and if you are married you MUST be sure your spouse is fully on board. Bad things happen in your brain when you get surprised by the sudden revelation that your spouse has spent all of your investment savings after a lifetime of what you thought was a combined effort.
Whether you are a disadvantaged person in the slums of a foreign country or a newly graduated PhD soon to be offered a high paying job, you must work with what you have. An income is critical. One of my favorite philosophers, Will Rogers, used to say, “You can’t beat something with nothing.” There are people in the world who started with minimum wage jobs, and they are now worth more than the gross national product of some nations. Get a job.
My parents had the foresight to teach me a few valuable lessons early in life, and I thank them for it. I have been lucky to have examples around me that I could observe and learn from. Use your resources. If you see people who are succeeding, or failing, pay attention. And don’t be sucked into making the assumption that people who live in big houses and drive fancy cars are worth a lot of money. Most of them are in debt up to their eye-balls. I’m a firm believer that most workaholics are driven by debt. The successful ones are driven by a need to be good at what they do. The rest are up the proverbial creek. Pay attention and learn to differentiate. Sam Walton (Walmart) drove a ’67 Belair and an old Ford pickup until he died.
I love proverbs. Not the book of the Bible but popularly known and repeated sayings that express a truth based on common sense or experience. “A stitch in time saves nine,” or “don’t put all your eggs in one basket.” Such simple wisdom from long ago and popularized by generations that heeded the advice. One of my early lessons in finance from my parents was the simple saying, “If you spend everything you earn, you will always be poor.” Just as important was the next one, “The most sure way to get a raise is to cut your expenses.”
What do all of these sayings have in common? What does the wisdom of generations tell us? You have to feed yourself and keep yourself healthy, but almost every other thing in life is optional. You MUST have the ability to say “NO” to yourself. This does not mean that EVERYTHING has to go into an obsessive focus on becoming a miser. Set a percentage of your income and live on it. The rest goes to savings. Creating wealth is first and foremost about accumulating. A swimming pool can be filled a drop at a time. How can you expect to accumulate money if you spend everything you receive?
So this is the first task that takes an actual, physical act. Put a percentage of whatever you make away in some kind of savings account. I’ve seen people living on their paychecks, week to week, and they manage to save up in the last months of the year, “so the kids have a good Christmas.” Yet they can’t manage the same thing during the rest of the year. Other people spend what they don’t have, accumulating debt and even worse… interest on that debt, and they pay it off by the next year and do it all over again. If you can afford a toy for Christmas, then you better be able to afford a savings account. This is a common theme in all financial advice, “Pay yourself first.”
I swear to you, I know people who live well, monthly, on what others complain about making in a week. Learn to live well while not spending money. One of the most valuable commitments I made, something I have stuck with over time because it has served me so well, is to simply ask myself if I really need what I am buying. As part of this attitude, I have found all kinds of alternatives to spending money. I look at this practice as an enjoyable challenge. Does it feel good to buy something for a hundred dollars? Imagine how good it feels to walk away with a hundred dollars in your pocket. THAT is an epiphany! Set yourself a limit. If something costs more than fifty bucks, don’t buy it for a week. You will be surprised how few things stay a necessity after a week. And for the love of… whatever… max out your 401K savings. Most employers match a portion of it. It is FREE money!
Really, there are so many wonderful, challenging, and entertaining ways to live well on less money. I detest coupon shopping but will use them for the things I buy normally. I limit my movie going to those that demand a really large screen and will use my old television until it dies a natural death. One of the crucial things for any person to avoid is the idea that you have to replace something that works with the next newest thing. Avoid paying for unnecessary and too often unused insurance if you can. Buy a used car with cash, and pocket the money you would be putting into full coverage. Just don’t get in an accident. Odds are that you will save money. Paying cash means you also avoided paying interest. More to go into your pocket. I could go on and on, but this is one of the things that a young person has an advantage in learning. If you start young, you won’t have as many bad habits to break.
Now, what to do with your accumulated savings? I mentioned your 401K. That is an investment. The purpose of all accumulated savings is for investment purposes. Finding the right investments can be fun. Look at the search as a challenge. You want to do better than everyone else. Enjoy the competition.
I should elaborate a little on your 401K investing. I have a strategy that has worked well for me over time, better than anyone else I know (admitting that I know little of other’s specific strategies), and is so simple I can’t believe others don’t use it. Many financial advisors like to use a “buy and hold” technique. This is intended to be used in purchasing stocks and accumulating, NOT as a way to manage a 401K. Buy, yes… hold as an investment, yes… but ALWAYS trade amongst the mutual funds listed on your menu in your quarterly report. Get comfortable selling and repurchasing what is offered. In your listed funds there will be fluctuations in what they have earned. Pay attention to that, and always put your money in the funds with the highest returns of the last quarter.
Note that I said “returns” with an “s.” Don’t put all of your eggs in one basket, but invest in only the funds that show the best returns. The old saying, “the best predictor of future success is past success” holds true. If you have twenty or thirty choices, pick the top three, four, or five and put your money into them. Do this EVERY time you get a statement. That means you sell whatever has slipped below the top and reinvest in those that have risen. Easy. Make it happen. Those reports that list the stocks also offer information on what they consider those offering’s risk. I have never considered that information in making a purchase. I’m only buying for a single quarter, and the big, informed company that offers the portfolio has decided to place the fund on the menu. Don’t expect to pick winners perfectly, but using this information should net you better results than buying and leaving everything where it is forever.
The rest of your savings must be used. There are three strategies that are worth considering.
One is to buy and hold stocks. This works well for steady people with limited time to do research or a low tolerance for risk. I know people who have made it work well for them. They work hard, making money on the side which they use to add to their investments, living a life of concentrated effort to maximize their earnings, and rarely trade stocks while working with a large firm financial consultant. This is the most sure, steady paced method to accumulate wealth. But it usually takes a lifetime and trains you to always be working. I worry that it trains you so well that you will never be able to comfortably retire or enjoy what you have earned.
The second strategy is to go outside the box and look for other investments based on your own experience and expertise. Real estate, starting and/or owning a business, dealing in antiquities or military armament… all have a place in this type of plan. This one is more risky, and will surely be more exciting, but done well can be very rewarding.
I like number three. A combination of one and two. Accumulating in the stock market or with bonds, certificates of deposit, or anything that pays interest is a great way to put together a “risk fund” to be used when something presents itself that promises great returns. This means that you are always looking, always prepared, to jump at an opportunity. Oddly enough, it always seems that the next opportunity is just past the capability of your funds. But as they say, “patience is its own reward,” and with diligence and good timing you can find the opportunities. This combination of methods means that you have the best of both worlds, stability and risk.
The point is that without money set aside to be invested, there will never be anything invested.
One of the great disservices I believe many financial advisers use against people is to avoid timing the market. I’m not saying you should become a day trader and liquidate everything in a continuous cycle of churning your portfolio. What I am saying is that there are times, with clear indications, that you can see the writing on the wall. Whether it is your 401K, stocks, or real estate, you can often tell when the market is over heating or likely to crumble. My advice is to be aware and do what you think will protect your interests. I know people who buy and hold through the downs as well as the ups in the market. They buy more when the market is down and make the return as it comes up. That’s great if they can’t help taking the fall, but they failed to protect what they had to begin with. A person who jumps out before a large crash, or soon after it begins, protects what they have and will have more capital to buy back in when the bottom is found. Protecting what you have by paying some small commissions in selling is far better than taking a loss and waiting for a market to rebound.
The killer to all investment is debt. Paying interest is like throwing your money away. You should be paying cash for new vehicles at some point and later for a home. You are the one who wants to be paid interest, not the other way around. Paying cash is paying yourself interest.
Time… Time is the great equalizer for us all. But how you use your time is going to determine where you are next year and the year after that. And in the end, where you will be able to go. The question is whether you will have done what it takes. I have often heard people express the desire to be rich. The question that comes to my mind is “What are you willing to do to get there?”
The first step is making the decision.
Easy Steps to Becoming Wealthy Make the decisionStart nowGet a jobUse what you havePay yourself firstLearn from exampleEnjoy being frugalInvestProtect your assetsAvoid debtRetire before you are trained to work until you die
Click HERE to receive these blog posts in your inbox.
www.readmota.com
“Whaaaaaaaaaat?!?! What do you MEAN, so easy to be rich?”
Well, I mean it is easy to be rich. Not by winning the lottery but by becoming wealthy by intentional effort. I know, I know… the common perception is that becoming wealthy is difficult. Well, not really. It is uncommon but not difficult.
Now lean in close, and I’ll tell you how to do it.
First off, let’s define some assumptions. Let’s assume I am speaking to a young person at the beginning of their earning years. All of this will apply to older people as well, but depending on age and income, not as much. So that is the first lesson… start early.
Listen, this can get away from you. Just like a physical ability, basketball, competitive running, ballroom dancing, you can tell yourself, “I could do that,” and yet you don’t. The years pile up, one on top of the other, and all of a sudden you realize that winning Dancing with the Stars will never be in your future. So no matter what age you are, if you want to be in better shape next year, the time to start is NOW.
Don’t be discouraged. This is going to be easy, remember? Now that you understand the immediacy of beginning, the next step is one often missed by financial advisors. This is the most difficult and yet most critical part of the process. Make a decision to start. RIGHT NOW! DO IT! Just like quitting smoking, you can’t be successful until you make “The Decision.” Once you REALLY make the decision, you are a non-smoker. Everything before was just practice. Until you make the decision to begin a task, it is all fantasy.
I know, you are probably saying to yourself, “Well, let’s just see what else he has to say first. Then I’ll decide.” That’s fine, too. It is said that caution is a virtue, and it is, as long as it doesn’t keep you from making the decision before it is too late. If you never become wealthy, then you put off the decision. Oh… and if you are married you MUST be sure your spouse is fully on board. Bad things happen in your brain when you get surprised by the sudden revelation that your spouse has spent all of your investment savings after a lifetime of what you thought was a combined effort.
Whether you are a disadvantaged person in the slums of a foreign country or a newly graduated PhD soon to be offered a high paying job, you must work with what you have. An income is critical. One of my favorite philosophers, Will Rogers, used to say, “You can’t beat something with nothing.” There are people in the world who started with minimum wage jobs, and they are now worth more than the gross national product of some nations. Get a job.
My parents had the foresight to teach me a few valuable lessons early in life, and I thank them for it. I have been lucky to have examples around me that I could observe and learn from. Use your resources. If you see people who are succeeding, or failing, pay attention. And don’t be sucked into making the assumption that people who live in big houses and drive fancy cars are worth a lot of money. Most of them are in debt up to their eye-balls. I’m a firm believer that most workaholics are driven by debt. The successful ones are driven by a need to be good at what they do. The rest are up the proverbial creek. Pay attention and learn to differentiate. Sam Walton (Walmart) drove a ’67 Belair and an old Ford pickup until he died.
I love proverbs. Not the book of the Bible but popularly known and repeated sayings that express a truth based on common sense or experience. “A stitch in time saves nine,” or “don’t put all your eggs in one basket.” Such simple wisdom from long ago and popularized by generations that heeded the advice. One of my early lessons in finance from my parents was the simple saying, “If you spend everything you earn, you will always be poor.” Just as important was the next one, “The most sure way to get a raise is to cut your expenses.”
What do all of these sayings have in common? What does the wisdom of generations tell us? You have to feed yourself and keep yourself healthy, but almost every other thing in life is optional. You MUST have the ability to say “NO” to yourself. This does not mean that EVERYTHING has to go into an obsessive focus on becoming a miser. Set a percentage of your income and live on it. The rest goes to savings. Creating wealth is first and foremost about accumulating. A swimming pool can be filled a drop at a time. How can you expect to accumulate money if you spend everything you receive?
So this is the first task that takes an actual, physical act. Put a percentage of whatever you make away in some kind of savings account. I’ve seen people living on their paychecks, week to week, and they manage to save up in the last months of the year, “so the kids have a good Christmas.” Yet they can’t manage the same thing during the rest of the year. Other people spend what they don’t have, accumulating debt and even worse… interest on that debt, and they pay it off by the next year and do it all over again. If you can afford a toy for Christmas, then you better be able to afford a savings account. This is a common theme in all financial advice, “Pay yourself first.”
I swear to you, I know people who live well, monthly, on what others complain about making in a week. Learn to live well while not spending money. One of the most valuable commitments I made, something I have stuck with over time because it has served me so well, is to simply ask myself if I really need what I am buying. As part of this attitude, I have found all kinds of alternatives to spending money. I look at this practice as an enjoyable challenge. Does it feel good to buy something for a hundred dollars? Imagine how good it feels to walk away with a hundred dollars in your pocket. THAT is an epiphany! Set yourself a limit. If something costs more than fifty bucks, don’t buy it for a week. You will be surprised how few things stay a necessity after a week. And for the love of… whatever… max out your 401K savings. Most employers match a portion of it. It is FREE money!
Really, there are so many wonderful, challenging, and entertaining ways to live well on less money. I detest coupon shopping but will use them for the things I buy normally. I limit my movie going to those that demand a really large screen and will use my old television until it dies a natural death. One of the crucial things for any person to avoid is the idea that you have to replace something that works with the next newest thing. Avoid paying for unnecessary and too often unused insurance if you can. Buy a used car with cash, and pocket the money you would be putting into full coverage. Just don’t get in an accident. Odds are that you will save money. Paying cash means you also avoided paying interest. More to go into your pocket. I could go on and on, but this is one of the things that a young person has an advantage in learning. If you start young, you won’t have as many bad habits to break.
Now, what to do with your accumulated savings? I mentioned your 401K. That is an investment. The purpose of all accumulated savings is for investment purposes. Finding the right investments can be fun. Look at the search as a challenge. You want to do better than everyone else. Enjoy the competition.
I should elaborate a little on your 401K investing. I have a strategy that has worked well for me over time, better than anyone else I know (admitting that I know little of other’s specific strategies), and is so simple I can’t believe others don’t use it. Many financial advisors like to use a “buy and hold” technique. This is intended to be used in purchasing stocks and accumulating, NOT as a way to manage a 401K. Buy, yes… hold as an investment, yes… but ALWAYS trade amongst the mutual funds listed on your menu in your quarterly report. Get comfortable selling and repurchasing what is offered. In your listed funds there will be fluctuations in what they have earned. Pay attention to that, and always put your money in the funds with the highest returns of the last quarter.
Note that I said “returns” with an “s.” Don’t put all of your eggs in one basket, but invest in only the funds that show the best returns. The old saying, “the best predictor of future success is past success” holds true. If you have twenty or thirty choices, pick the top three, four, or five and put your money into them. Do this EVERY time you get a statement. That means you sell whatever has slipped below the top and reinvest in those that have risen. Easy. Make it happen. Those reports that list the stocks also offer information on what they consider those offering’s risk. I have never considered that information in making a purchase. I’m only buying for a single quarter, and the big, informed company that offers the portfolio has decided to place the fund on the menu. Don’t expect to pick winners perfectly, but using this information should net you better results than buying and leaving everything where it is forever.
The rest of your savings must be used. There are three strategies that are worth considering.
One is to buy and hold stocks. This works well for steady people with limited time to do research or a low tolerance for risk. I know people who have made it work well for them. They work hard, making money on the side which they use to add to their investments, living a life of concentrated effort to maximize their earnings, and rarely trade stocks while working with a large firm financial consultant. This is the most sure, steady paced method to accumulate wealth. But it usually takes a lifetime and trains you to always be working. I worry that it trains you so well that you will never be able to comfortably retire or enjoy what you have earned.
The second strategy is to go outside the box and look for other investments based on your own experience and expertise. Real estate, starting and/or owning a business, dealing in antiquities or military armament… all have a place in this type of plan. This one is more risky, and will surely be more exciting, but done well can be very rewarding.
I like number three. A combination of one and two. Accumulating in the stock market or with bonds, certificates of deposit, or anything that pays interest is a great way to put together a “risk fund” to be used when something presents itself that promises great returns. This means that you are always looking, always prepared, to jump at an opportunity. Oddly enough, it always seems that the next opportunity is just past the capability of your funds. But as they say, “patience is its own reward,” and with diligence and good timing you can find the opportunities. This combination of methods means that you have the best of both worlds, stability and risk.
The point is that without money set aside to be invested, there will never be anything invested.
One of the great disservices I believe many financial advisers use against people is to avoid timing the market. I’m not saying you should become a day trader and liquidate everything in a continuous cycle of churning your portfolio. What I am saying is that there are times, with clear indications, that you can see the writing on the wall. Whether it is your 401K, stocks, or real estate, you can often tell when the market is over heating or likely to crumble. My advice is to be aware and do what you think will protect your interests. I know people who buy and hold through the downs as well as the ups in the market. They buy more when the market is down and make the return as it comes up. That’s great if they can’t help taking the fall, but they failed to protect what they had to begin with. A person who jumps out before a large crash, or soon after it begins, protects what they have and will have more capital to buy back in when the bottom is found. Protecting what you have by paying some small commissions in selling is far better than taking a loss and waiting for a market to rebound.
The killer to all investment is debt. Paying interest is like throwing your money away. You should be paying cash for new vehicles at some point and later for a home. You are the one who wants to be paid interest, not the other way around. Paying cash is paying yourself interest.
Time… Time is the great equalizer for us all. But how you use your time is going to determine where you are next year and the year after that. And in the end, where you will be able to go. The question is whether you will have done what it takes. I have often heard people express the desire to be rich. The question that comes to my mind is “What are you willing to do to get there?”
The first step is making the decision.
Easy Steps to Becoming Wealthy Make the decisionStart nowGet a jobUse what you havePay yourself firstLearn from exampleEnjoy being frugalInvestProtect your assetsAvoid debtRetire before you are trained to work until you die
Click HERE to receive these blog posts in your inbox.
www.readmota.com
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