Wealth Habit

Foolish Man Built His House Upon the Sand

2009-07-09T07:54:00.000-07:00

This morning I was doing my morning scripture study and read a passage of scripture that I was very familiar with, but never thought of it in the domain of finance before.

In the New Testament, Matthew chapter 7 versus 24-27, it reads:

Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock:

And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock.

And every one that heareth these sayings of mine, and doeth them not, shall be likened unto a foolish man, which built his house upon the sand:

And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell: and great was the fall of it.

This is such a simple analogy, yet is packed with so much wisdom. As I look back at my financial path it is very obvious to see how fast the house falls when built upon a sandy foundation.

The current financial storm that we are in the middle of has made apparent the fact that it is not IF the storm will come, it is WHEN the storm will come.

Here is the rock of a foundation described above that is surely to withstand the financial storms of life:

1. Pay yourself the first 10% of all you earn

2. Build a 3-6 month emergency reserve

3. Pay off all debt tied to depreciating assets - this includes cars, credit cards, etc. The two acceptable forms of debt are real estate & businesses.

4. Write a will

5. Invest your surplus in wise investments with those wise and experienced in their handling

6. Allow time and the miracle of compounding interest to be aid you

Tomorrow I will explain the process of moving from the sand to the rock. There is a formula that if followed will guarantee a smooth transition.

As the great Warren Buffett said, "You never know who is swimming naked until the tied goes out."

Michael Jackson's Finances Were THE Thriller

2009-06-29T08:04:00.000-07:00

Since the death of Michael Jackson last week, I have been interested in the many articles that describe the tangled web that was his financial life. The more I read, the more I realize that the age old financial principles apply to everyone, rich or poor.

Michael Jackson was one of the most prolific earners in the history of entertainment. He sold 61 million albums in the U.S. and had a decade-long attraction open at Walt Disney theme parks. The New York Times reports that he earned about $700 million as a performer and songwriter from the 1980’s on.

As if that is not a lot of money already, his most valuable asset was Beatles' music -- in 1985 he paid $47.5 million for ATV Music, which owned the copyright to 259 songs written by John Lennon and Paul McCartney. According to some estimates, he brought in an additional $300 million in record royalty fees from that deal.

Earning however, is only half of the equation. As Notorious B.I.G. declared, “Mo money, mo problems.”

In 1988, he paid $14.6 million for Neverland Ranch, a 2,500-acre property in Santa Barbara, CA. This “ranch” was complete with a theme park, a steam railway, lakes, a cinema and a zoo with giraffes, lions and tigers. At its peak, it was valued at over $100 million and he had as many as 150 employees running it, costing millions of dollars each year to maintain it.

A couple of years ago he nearly defaulted on the $24.5 million dollar loan tied to Neverland. Thomas Barrack, chairman and CEO of Los Angeles-based real estate investment firm Colony Capital LLC, agreed to bail out Jackson and set up a joint venture with him to take ownership of Neverland, yielding a $23 million loan.

“Michael never thought his personal finances were out of control,” said Alvin Malnik, a former advisor to Michael Jackson and godfather of Prince Michael II, the youngest of his three children. “He never kept track of what he was spending. He would indiscriminately charter jets. He would buy paintings for $1.5 million. You couldn’t do that every other week and expect your books to balance.”

As his income peaked out, his spending did not, forcing him to borrow money to finance his spending habits. In 2001, he used his half of the ATV Music assets as collateral to secure $200 million in loans from Bank of America.

The problem was that his appetite for spending exceeded his cash inflows -- to the tune of $20 million to $30 million each year. Right up to his death, he continued to lead a relatively lavish lifestyle, renting a property for a reported $100,000 a month in Los Angeles.

Whether you make hundreds of millions or tens of thousands, the lessons remain the same:

Know how much you earn
Know how much you spend
Spend less than you earn
Don’t borrow money to finance your lifestyle

He Lives Vicariously Through Himself

2009-06-01T08:56:00.001-07:00

In watching some NBA playoffs the last couple of weeks, a line in a commercial caught my eye. In this commercial for Dos Equis, they are trying to portray an old(er) man as the most "Interesting Man in the World". He is so cool that "he once had an awkward experience, just to know what it felt like." That is not the line that grabbed my attention but helps you understand the image they were creating. They go on to tell you as he is jousting with someone that "he lives vicariously through himself." Sounds ridiculous at first.

As I have thought about it and reflected on it, I really like it.

Too many in our society are living vicariously through someone else. They do it through Desperate Housewives, American Idol, NBA Basketball (my weakness), US Weekly, romance novels, Guitar Hero and blogs. The list goes on. I speculate that they do it because it is more interesting than their own life and it takes great focus and emotional energy to create a good life for yourself.

The most successful people I know and admire actually do live vicariously through themselves. They do it by spending their hours becoming their best selves. This could be in their career, with their spouse and children, competing physically, and by serving those around them in need.

The very act of watching other people live their "good life" robs us of the precious time we need to create our own. I have begun the process of observing those around me who are successful, interesting and happy to see what percentage of time they spend living vicariously through others and how much through themselves. So far, it is pretty obvious why some peoples lives are far more interesting, fulfilling and more enjoyable to watch.

"Dost thou love life? Then do not squander time, for that is the stuff life is made of." - Benjamin Franklin

Are You Paying or Collecting?

2009-05-28T08:28:00.001-07:00

My brother had a very interesting observation the other day. We were having a conversation about building wealth and he said that one of the best gages is to understand your "Interest Collected vs. Interest Paid ratio" (ICIP Ratio...I just made that up). The more I thought about it the more I completely agree that it is one of the best ways of knowing how financially healthy you really are.

Let's compare two different people:

Mr. DooDad is a good earner, 125k year, but really enjoys his toys. As a matter of fact, he has yet to see a toy he does not like. Because of this "DooDad" addiction, his ICIP ratio looks like this:

House $1500/mo interest

Car 1 $250/mo interest

Car 2 $175/mo interest

Boat $475/mo interest

Credit Card $225/mo interest

Interest Paid $2625/mo interest

401k $125/mo

Money Market $12/mo

Interest Collected $137/mo

Mr. Doodad collects a measly $137 a month in interest and pays $2625 a month interest. So his ICIP ratio is 1:19.

Mrs. Wisdom is also a good earner, 100k year, but she has used her cash to buy assets that she can collect interest on. She has been wiser with her money, buying her cars in cash and never using a credit card. Her ICIP ratio looks like this:

House $1000/mo interest

Rental House1 $750/mo interest

Rental House2 $1100/mo interest

Interest Paid $2850/mo interest

Rental House1 $1400/mo interest

Rental House2 $1750/mo interest

401k $1500/mo interest

Roth IRA $750/mo interest

Indexed Fund $2500/mo interest

Money Market $150/mo interest

Interest Collected $8050/mo interest

Mrs. Wisdom collects a whopping $8050 a month in interest and only pays out $2850 a month so her ICIP ratio is 3:1. Over time, as her renters pay off her rental house mortgages, her ratio will climb to 8:1.

Spend 10 minutes and figure out your ICIP ratio. Are you closer to a Mr. Doodad or a Mrs. Wisdom? How long will it take you to retire by following Mr. Doodad's plan? The rhetorical question's answer is probably forever!

Can I Get Triple Insurance Coverage Please?

2009-05-06T20:06:00.000-07:00

Fear of loss looms much larger than thought of gain.

In a study by Professor Daniel Putler, a former researcher for the Department of Agriculture, he made a very interesting discovery in an expansive study of all egg purchases in southern California. Economic theory says that price fluctuations should be received with equal intensity whether prices go up or down. What he discovered was something very different. When prices were reduced, consumers bought a little more than normal. When prices were increased, consumers completely overreacted and cut back their egg purchases by two and half times! You can probably validate that if you are the grocery shopper in your home. If prices go up, you decide to cut that product out when at all possible.

We experience pain associated with loss much more intensely than we do with the glee of experiencing a gain.

Taking these findings and relating it to things financial may provide a new lens in which to observe your behavior and how companies use this against you.

Take renting a car. At the last minute before signing the rental contract, they ask if you would like "loss damage waiver" insurance. The threatening phase conjures up all kinds of fear that most people pay for the expensive and redundant coverage.

If you haven't taken the time, do a little research and you will most likely discover that both your current auto policy and credit card will cover any "loss damage" issues that would arise. The offered policy is a easy way to generate huge revenue by playing on humans "loss" aversion.

There is a helpful article titled "Do you really need rental car insurance?" on USA Today.

Pay attention to how sly marketers are using this irrational fear against you to get you to quickly and consistently part with your hard earned cash.

Can You Change Everything?

2009-05-05T07:51:00.000-07:00

In a knowledge based economy, one in which knowledge is key to success, not strength or length of time, it is critical to accumulate knowledge at a much faster and more effective rate than before. This means that learning cannot end after college or you will get downsized or outsized.

Every morning I spend an hour a day reading various newspapers, articles and blogs in an effort to learn and to ultimately think differently to produce superior results. One of the great marketers and bloggers is Seth Godin. He had a great post yesterday about changing your situation and gave 45 suggestions of things you can do to jump start your business and/or life. Enjoy!

Can you change everything?

You might not be as permanently stuck in a rut as you think. The rut you're in isn't permanent, nor is it perfect. There are certainly less perfect ruts, but there may be better ones as well. The certain thing is that you can change everything...

Buy a competitor
Sell to a competitor
Publish your best work for free online
Close your worst-performing locations
Open a new branch in a high-traffic location
Hire the best salesperson away from the competition
Join the competition
Host a conference for your competitors
Connect your best customers and organize a tribe
Fire the 80% of your customers that account for 20% of your sales
Start a blog
Start a digital bootstrap business on the weekends
While looking for a job, spend 40 hours a week volunteering and freelancing for good causes
Go on tour and visit your best customers in person
Answer the customer service line for a day
Learn to be a killer presenter
Let the most junior person in the organization run things for a day
Delete your website and start over with the simplest possible site
Call former employees and ask for advice
Move to Thailand
Listen to audio books in your car instead of the radio
Sell your cash cow division to the competition and invest everything in the new thing
Find more products for your existing customers to buy
Become a gadfly and tell the truth about your industry
Quit your job
Move your operations to another city
Become a vegan
Have all meetings in a room with no chairs, and everyone wears a bathrobe over their clothes
Open your offices only four hours a day
Open your offices 24 hours a day for a week
Find every project that is near the danger zone (in terms of p&l or deadlines) and cancel it, no appeals
Go for a walk during lunch
Get an RSS reader and read a lot more blogs
Go offline for longer than you thought possible
Write five thank you notes every day
Stop sending spam
Do your work somewhere else. Set up your chiropractic table at the mall
Have everyone at work switch offices
Give your most valuable possessions to a stranger
Go see live music
Start a company scrapbook and take daily notes
Hire a firm to make a documentary about your organization
Buy some art
Make some art.
Do the work.

Get Compound Interest on Your Side

2009-05-04T07:35:00.000-07:00

There is a reason that Albert Einstein declared, “The most powerful force in the universe is compound interest”.

Compound Interest can be your fiercest enemy or your most powerful ally.

Compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on. The act of declaring interest to be principal is called compounding (i.e., interest is compounded). A loan, for example, may have its interest compounded every month: in this case, a loan with $100 principal and 1% interest per month would have a balance of $101 at the end of the first month.

Here are some examples of the power of compounding:

Credit Card Balance of $15,000 at 29% interest

- $4350 a year in interest

- If you never made a payment, would climb to $683,812 in 15 yrs

Latte for $3.50 for five days a week

- If saved money instead and invested at 6%

- In 10 years you would have $12,000

- In 15 years you would have $21,189

Car payment of $300 month from age 22-52

- If paid for car in cash and saved and invested money instead at 6%

- In 30 years you would have $284,609

401k at work investing 10% of your $50,000 annual salary

- If invested with a 6% return

- Over a career of 30 years you would have $395,290

Keep your first house as a rental property

- original purchase price of $200,000

- 4% home price (national average since 1942)

- In 30 years the value would be $648,679

- …and the mortgage would be paid off now

Rental Income on your first house

- $1200 when you first rent it out at age 30

- Assuming a 3% annual increase in rental rates

- At age 60, rents would now be $2912

- …and the mortgage would be paid off now

Compound interest is a double edged sword. Great to have on your side and miserable to have working against you.

Where can you swing the momentum of compound interest on your side to create a better future for yourself and your family?

Where Does the Time Go? I Know

2009-04-28T07:36:00.000-07:00

Ever lay your head down at night and ask yourself, "Where does the time go?" I have the answer.

A recent report by the Council of Research Excellence revealed an alarming statistic: Adults are exposed to screens - TV's, computers, cellphones, etc. - for about 8.5 hours on any given day. It goes on to say that TV is the dominant medium.

Ball State did a study that found the average American adult was exposed to five hours and nine minutes of live TV each day.

Do the math. That is 1879 hours a year or over 46 (forty hour) work weeks per year!

Imagine the impact in a lifetime if you would invest that time into your relationship with your spouse, spending quality time with your kids, reviewing and planning your finances, investing time and energy into your career, working out.

How much more could you get out of life if you made a better investment choice of your time?

You may be thinking, I don't watch 5 hours a of TV a day! I challenge you to track it for a week. Add up the hours, multiply it out over a year and determine if there is a priority change that could lead you down a more prosperous path.

Put Your Money Where Your Mouth Is

2009-04-17T07:49:00.000-07:00

Determined to reach my goals in multiple areas of my life, I decided account-ability would provide me the kick I needed. I talked to a good friend and my brother to hold me accountable in different areas.

In the business part of life I committed to being in the office by 7am everyday, planning my night the day before so I have clear, prioritized direction, and lastly I committed to workout everyday this week. I chose a consequence that would be painful enough to get the action I needed. My love language is the Benjamin Franklin. I owe a $100 bill for everyday I do not meet the three commitments I made.

As you might guess, I am 3 for 3 since our meeting!

My brother and I are meeting in Vegas in 45 days with our families for some sun and pool time. We committed last night to a "fitness duel-off". We will determine the winner by a combination of things like measurements, percentage improvement, and who looks best with their shirt off by the pool. This means I have to lay off of my straight Coca-Cola diet and drink more water and choose healthy meal choices. It means that I will need to really hit it hard in the gym and not just assume that by being around others who are fit and sweaty that it will rub off on me.

At times it seems pathetic that I need to play these games to get where I want to go in life, but I have learned through experience that I am not able to push myself hard enough on my own.

Stephen Covey said it best when he said, "Accountability breeds responsibility".

Is there somewhere in your life that you could work with to push eachother to be your best self?

What the Fish Can't See

2009-04-16T07:55:00.000-07:00

I have spent the last few days reflecting on a conversation I had with my mom the other night who just returned from China. She came back with a renewed enthusiasm about the opportunity that surrounds us. She reported that with the recent lift of communism, the Chinese citizens are seeing opportunity everywhere. She commented on the positive energy and vibe in Beijing. They recognize the freedom they have to create the lives they desire. They control their own future.

It is easy to get complacent when we have had it so good for so long. Just as the fish can't see or appreciate the water he swims in, we can't see or appreciate the opportunity that we have. With freedom to work where we want to work, study what and where we want to study, and spend our money how we want to spend it, it is laughable that we whine about our circumstances when we only have ourselves to blame.

We are a sum of our thinking, decisions and actions.

Take that fish out of water for about 10 seconds and I can guarantee that water is all it will think about. Maybe it is time for us to take a quick trip to a third world country to enable us to see the opportunity we are swimming in.

Is it a coincidence that the Russian ancestry group ranks first in the highest percentage of millionaire households per capita? Although the Russian ancestry group accounts for only about 1.1 percent of all households in America, it accounts for 6.4 percent of all millionaire households. It is estimated that approximately 22 of every 100 households headed by someone of Russian ancestry has a net worth of $1 million or more.

James Allen said it best in As a Man Thinketh, "As a being of Power, Intelligence and Love, and the lord of his own thoughts, man holds the key to every situation, and contains within himself that transforming and regenerative agency by which may make himself what he wills.”

Abe Lincoln's Formula for Prosperity

2009-04-15T08:59:00.000-07:00

So much wisdom in this piece. These are great principles to live by when building a company, a family, or a community.

thrift is the precursor to prosperity
we all need to work together to be successful
cannot spend more than you earn
initiative and independence build character and courage
teach a man to fish and he will fish for a life time

As I prepare for the birth of my first child in September, these are the lessons that must be taught to provide them any chance of success. Imagine a child raised on these five principles, how different would our world be if we reverted back to good old fashioned common sense.

They Are Not Your Friend

2009-04-09T08:48:00.000-07:00

The Wall Street Journal reported today that Bank of America is raising interest rates on 4 million US Credit Card customers who are carrying a balance. This means that even if you have always paid your account on time, you can expect your rate to go up if you don’t pay off the balance at the end of each month. WSJ reports:

“Starting with June account statements, any credit-card customer who carries a balance and has an interest rate below 10% will see his or her rate jump into double-digit territory.”

“The bank's move follows similar rate increases that other banks, including Citigroup Inc., JP Morgan Chase & Co., and American Express Co. have implemented in recent months. The banks, facing rising delinquencies, blame the economic turmoil. Many have been tightening the screws on people with less-than-perfect credit, but now they're pinching a broader range of customers who have good credit records, but carry a balance.”

The underlying lesson is that credit card companies are not your friends, even though they lay down the red carpet on your first date. They appear so generous and helpful and always seem to ride in on the white horse at the perfect time. Whether it is at the department store when you have way too much stuff in your arms and they generously offer you a 10% discount for becoming their friend or when a 0% balance transfer arrives in the mail serendipitously to convert your Citi card at 29.99% to a lower rate.

Having spent much of my own life racking up credit card debt, I have a new vantage point now that I have made a commitment to pay for everything in cash. Hindsight is 20/20. If I couldn’t afford to pay cash on the spot, how could I afford to pay for whatever I was buying with 29% tacked on top? The math does not work, but I guess it is because I never stopped to do the math. I was having too much fun shopping.

I once heard a catchy little phrase that helped me to see what I was actually doing,

Buying things I do not need

With money I do not have

To impress people I do not know

Tomorrow I will share a strategy to get out of debt as quickly as possible, because as we have seen, the furnace is only going to get hotter with major credit card companies turning up the heat.

Interesting Way to Save Money...

2009-04-08T08:14:00.000-07:00

A Couple of More Ways to Save Money:

1. Bake your own bread by hand

2. Knit your clothing

3. Wash your clothes using a washboard to save electricity

4. Don't wash your car to save water and soap

5. Shave every third day to save cost of razors

6. Use washable diapers if have young children

7. Drink powdered milk

8. Hang your clothes to dry

9. Eat with your hands

10. Cancel cell phone and only use a landline

Money as a Symbol

2009-04-07T08:55:00.000-07:00

A friend of mine owns a coaching company, Sensible Coaching, focused on helping people with money. Her unique talent is helping people and their relationship with money.

She wrote a great article titled “Money as a Symbol” that has some very thought provoking observations.

“We assign meaning and significance to money that is purely arbitrary. We act as if money has will and volition on its own. We blame things on money, and, even more amazingly, we assign responsibility to money. Money seems to be responsible for ideas like “Rich people aren’t as nice as poor people” or “I always struggle with money”. The way these concepts are expressed makes it seem like money itself is the responsible party, and not the humans involved in the process.”

She then goes on to point out that many words in our culture simultaneously hold sway over both money and our sense of who we are. A few examples are:

Worth and worthy. No mistake here. Notice how often we seem to tie our worthiness to our worth. We even speak of “self worth”

Credit. We use the word “credit” to imply validity and trustworthiness, even to give praise. And then there is that whole issue of your credit when it comes to how much you can borrow. Have credit cards changed the way we think of the word “credit”?

Broke. Here’s the big one, if you are broke, are you broken? Many people feel a direct connection here, as if being broke truly does make you a broken human being.

I have had thoughts such as these at times in my life. With reflection, I have learned that money cannot buy me happiness or make me a good or likable person, just as it cannot make my unhappy or unlikable. I look at money as fuel I need to live the life I desire, and like any other fuel, it can run out at times and you can certainly get more.

I grew up with a phrase from a wise mother that was oft repeated, usually after I broke something or wrecked a car… “It is only money, let’s go make more.”

She understood what money was and what it was not. Money is the easiest of life’s problems to fix.

Lessons From the Men's Urinal

2009-04-06T08:22:00.000-07:00

I recently ran across an experiment conducted in the men’s room at Schiphol Airport in Amsterdam. Authorities had etched the image of a black housefly into each urinal. As women can attest to and most men would sheepishly admit, men don’t pay much attention to where they aim, which can create a mess. However, if they have a target, something to aim for, their attention and therefore accuracy are dramatically increased. According to the man who came up with the idea, it works wonders. “It improves the aim,” says Aad Kieboom. “If a man sees a fly, he aims at it.” Kieboom, an economist, directs Schiphol’s building expansion. His staff conducted the fly-in-urinal trials and found that etchings reduce spillage by 80 percent.

The results are shocking when we have something to aim at. Prior to the target, the men didn’t even pay attention. With a target, attention increased and results improved by 80 percent. Doesn’t this same lesson apply in all areas of our life?

What if in our careers, we had an income target? Not the one the boss sets for you, but one that matches your prerogative and ambition? Wouldn’t your attention increase? You would have a better filter in which to run your actions through, quickly realizing that much of what we do in a day will not increase income. This income target, etched in your mind would surely increase your aim, focus and results.

What if in our finances, we had a short-term, mid-term and long-term target to aim at? Wouldn’t you pay more attention to what you were spending your money on? If there was a way to keep those targets in mind every time you went to make a purchase, don’t you think you would increase your results by 80 percent? 8 out of every 10 times you would be able to make a more grounded decision on need versus want.

What are you aiming for?

“Most people aim for nothing and hit it with amazing accuracy.” – Joe Niego

Successful Habits Formula

2009-04-03T09:03:00.000-07:00

“Our character is basically a composite of our habits. Because they are consistent, often unconscious patterns, they constantly, daily, express our character.” – Steven Covey

While re-reading The Power of Focus by Jack Canfield and Mark Victor Hansen I came across a section they call The Successful Habits Formula. It is really pretty simple, yet I have learned that it is through small and simple things that the great things come to pass.

The Successful Habits Formula

1. Clearly Identify Your Bad or Unproductive Habits

Make a list of them, everything from watching too much TV to sleeping too much to not working out. Write beside it the long term implications of that habit, be honest with yourself.

2. Define Your New Successful Habit

This is usually the opposite of the bad habit. Read instead of watching TV or getting up early to work out instead of sleeping in and not working out. Most importantly, write a vivid description of the benefits of the action.

3. Create a Three Part Action Plan

What are things you could do that would implement the new habit. Using the working out example: get a gym membership, develop a workout routine and schedule, get a friend to meet you at the gym as an accountability partner. Make sure you are being accountable to someone. I have found this to be key.

It is very important that you prioritize these new habits and start with ONE. If you attempt to do multiple habits at once, you will eventually run out of self-discipline and return to mediocrity.

If you only changed one habit per quarter, imagine the difference you would see after only one year. Imagine a life of that!

Steve Prefontaine said it best and I have tried to make this my mantra “To give anything less than your best is to sacrifice the gift.”

It Is Not the Critic That Counts

2009-04-02T08:07:00.000-07:00

"It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat." - Theodore Roosevelt, Paris - April 23, 1910

I have this quote hanging on the wall of my office and hope you find it as inspiring as I do.

How Are You Dealing With Change?

2009-04-01T08:34:00.000-07:00

This recession underscores the harsh consequences of the failure to understand and respect the fundamental truths of the marketplace.

Two of these truths are:

real estate and stock markets are cyclical (they go up and down)
the marketplace is constantly changing due to technology, demographics, economics and politics

As I look around at different people, those who are the most afraid are those who are most lacking knowledge. They don’t understand the drift of the marketplace. They are completely dependent upon their employer for their ability to eat. They have abdicated the thinking and planning of their future to their boss. They have taken competitive learning out of their life since college and are “hopeful” that everything will work out or return to how it was.

"Success depends upon previous preparation, and without such preparation there is sure to be failure." Confucius

Now is the time to prepare for the future. Life is not going to get easier, we need to learn to make it easier. We need to take the responsibility upon ourselves to learn and think and strategize and act powerfully. We cannot rely on someone else to figure it out and then “hope” that we fit into the plan.

The world will never be the same and as far as I am concerned that is great news. It is the change that creates new opportunity and the person who is prepared will reap the rewards.

“Luck favors the mind that is prepared.” - Louis Pasteur

Here are some sources for learning:

The Aji Network – I have been in courses with them for 3 years and it has completely changed the way I think - http://www.theajinetwork.com/index.php

TED.com – source for tons of educational videos, all free - http://www.ted.com/

MIT OpenCourseWare – MIT has made available all of their curriculum for free - http://ocw.mit.edu/OcwWeb/web/home/home/index.htm

Insightful Magazines – most are fee now online – Fast Company, Inc, The Economist, Business Week,

Read Books – ask those around you that are successful what they are reading – libraries are still free!

Can You Hand Me That PledgeHammer?

2009-03-31T07:35:00.000-07:00

One of the topics that I have been passionate about for sometime is the need to build successful habits to reach your potential. Dr. Tony Schwartz teaches in the Power of Full Engagement that we have a finite amount of self-discipline and therefore we can only set out to change a limited number of things in our life at a time without running out of energy.

Ever wonder why you are not the only one who has failed at keeping 29 different New Years Resolutions? He says the solution is to build habits. Habits once effectively established no longer take self-discipline to keep going, but rather energy to break.

An important part of building these new habits is being accountable. I recently ran across a website that does just that, helps you be accountable.

www.PledgeHammer.com

Pledgehammer.com is a site that helps you keep your promises. They do this by making your pledge public and asking you to decide on a deadline as well as a financial incentive. Should you not succeed they ask you to donate money to a charity you choose yourself. This way your unsuccessful pledge may help to save the rainforest or support families in third world countries, making it not all that unsuccessful after all.

I thought it was a very interesting idea and one that can certainly help in an area that I believe we all could use help in.

Money Can’t Buy You Happiness…or Can It?

2009-03-30T08:20:00.000-07:00

“Money can’t buy you happiness…but it can buy you a Waverunner,” said the comedian to start his routine.

I couldn’t say it better myself. Last night, my wife and I had a conversation on this very topic. Fortunately, we both agree that money cannot buy you happiness. I spent 2 years in Brazil on a mission for my Church and experienced poverty beyond comprehension for this day and age. What shocked me was the observation of the families who lived in it, often times were happier than the wealthy American families that I knew back home. To prove I was not in some spiritual fantasy land, I certainly experienced families in the depths of poverty that were absolutely miserable and unhappy.

The lesson I learned is that the two are disconnected. Happiness and pleasure have been used interchangeably in the English language and I think they are very different. Pleasure is short term, and I know first hand that money can buy you pleasure. What I have yet to see is the case where money bought long term happiness.

What money can do is enhance an already happy existence. Yesterday I talked to one family who went camping over spring break. Now, I happen to know camping was the recreation of choice because it is virtually free. By the way it was 45 degrees and raining! I know of another family that went to Mexico for the week and stayed in a beach front villa. All things being equal, I’ll take the Mexican trip to paradise please.

That leaves us all with some thinking and planning to do. First and most important, what is happiness? How do I achieve it today, tomorrow and twenty years from now? Secondly, what is my ideal life and how much does that cost? How will I fund it?

How Does That Math Work?

2009-03-27T08:56:00.000-07:00

I spent some time with a very bright money manager yesterday and he shared something that I had never noticed or more importantly understood.

For simplification purposes, I will show you 4 years of stock market returns. We will start with $100,000 in our account and then I will specify a certain stock market return for that year and then the next years balance will be a result of that previous years return. Let me show you:

Year 1

Starting Balance $100,000

Stock Market Return -50%

Year 2

Starting Balance $50,000

Stock Market Return +100%

Year 3

Starting Balance $100,000

Stock Market Return -50%

Year 4

Starting Balance $50,000

Stock Market Return +100%

Year 5

Starting Balance $100,000

In this example, we had 2 years that had a 100% return and 2 years that had a -50% return. If we were to calculate the average rate of return for those four years you would get an average 25% rate of return. In reality, you finished with the same amount you started with, $100,000, no where near a 25% rate of return.

The numbers that are thrown around in your mutual fund and 401k prospectus are designed to help you, but do not tell the whole story. More time must be spent really understanding your numbers because your ability to retire depends on it.

Take your investment accounts statements out and figure out how much you started with, how much you added, and how much you have now. Do the math, you’ll be shocked at the results. (If you don’t know how to figure it out, go find someone who does, or spend 20 minutes on google. It will be time well spent)

What Is Your EVE Ratio?

2009-03-26T08:11:00.000-07:00

EVE is an acronym for education versus entertainment. I was tipped off to a company called iLearningGlobal that talks about this EVE ratio.

They suggest that your future “destiny” depends greatly on your EVE ratio. I am not sure I agree with the word choice "destiny" but maybe destination.

Most people spend far more hours and money on entertainment than they do on education and yet remain perplexed at how unsatisfied they are with the results or destination they have reached.

Did you know that the average U.S. household watched TV for 8 hours and 18 minutes a day from September 2007 to September 2008, which is a record high since the days Nielsen Co. started measuring television in the 1950s.

What is your EVE ratio? Take one week and add up the hours of each.

Are you shocked at how little time and money you spend on improving yourself and your ability to build the life you desire?

The great Zig Ziglar said, “You don’t have to be great to start, but you do have to start to be great.”

Now What?

2009-03-25T10:21:00.000-07:00

After yesterdays post on "How Much Should You Be Saving Annually" you probably realize how much you underestimated the amount of money needed to invest to live in retirement. As I see it, three options arise:

Increase current income – if you are going to be a passive investor, you are bound by the economic factors of 8% annual return, 3% inflation, and 4% withdrawal rate, you simply must earn more money to allow for today’s requirements and tomorrow’s future
Become an active investor – if 8% won’t get you there, you must learn different strategies for netting a higher return. Real estate or investing in businesses could be an option.
Build a business – one of the great advantages of being self-employed is the autonomy you have to build something of residual value. When you are an employee, in most cases, you work for today’s wages and the day you retire your income stops. By building a business, you open the door to producing an asset that could be sold at retirement for a lump sum payment or residual income.

Most likely, any of the options above are going to require more knowledge than you currently have. The good news is that with the internet, almost all of what you need is at your fingertips and much of it is free.

Begin by talking with people you know who have already reached their financial goals with a fully funded retirement. Discover how they did it. Get to know others who are on their way and figure out what they are doing. Read some good books, go to some classes and seminars to increase your understanding of these options.

What you should not do is:

keep doing what you are doing
keep hanging out with the same people who are also not on track
keep reading the same things you have been reading
keep watching the same things you have been watching
keep spending your time doing the same things you have been doing

“When we are no longer able to change a situation, we are challenged to change ourselves.” ~Victor Frankl

“If you don't like something change it; if you can't change it, change the way you think about it.” ~Mary Engelbreit

How much should you be saving annually?

2009-03-24T08:44:00.000-07:00

Have you ever wondered how much money you should be investing to insure you have enough at retirement? I have been in a course for three years now called the Aji Network and they talk a lot about this. A paper they released is very helpful for your calculations to how much capital (money invested) is needed to produce $100,000 a year in today’s dollars.

First let me give you some assumptions that were made in arriving at this point:

3% Inflation – the historical average (avg. increase in the costs of goods and services)

8% Return on Investments – historical average if passive investing (putting money in market and leaving it)

4% Annual Withdrawals from Principle – this is given as the maximum rate of withdrawal as to decrease the likelihood that you will run out of money before you die (this is determined based upon the Monte Carlo calculations that take into account stock market volatility)

Here are the figures:

Age - 30

Years to Work until 62 - 32

$100k income at retirement - $257,508

Capital-at-Work needed to be on track today - $264,326

Capital-at-Work needed at 62 - $6,437,707

Minimum Annual Payments if started today - $47,966

If interested in looking closer, check it out the chart on their website.

If you think you can live on less than $100,000 after taxes you can cut the above numbers in half. Either way, it creates the need for some action and certainly a strategy and most likely a strategy different than the one you have. Now is the time to build the strategy and to do that you must begin to build relationships with those further down the road than you are.

Impact of Attitude on Life

2009-03-23T08:19:00.000-07:00

“The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company...a church...a home.

The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change the past...we cannot change that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude.

I am convinced that life is 10% what happens to me and 90% how I react to it. And so it is with you...we are in charge of our attitudes." - Charles Swindoll

This is a quote that my mother had hung on our fridge growing up. For years I was forced to look at it every time I was hungry. It was a mantra that she lived and in turn we learned from. What a blessing a positive, intentional mother is. What a better life I live for having been exposed to this philosophy.

Are They Scaring You?

2009-03-19T07:53:00.000-07:00

I thought it would be important to take a step back for a moment and quickly analyze who is footing the bill for those that are acting as alarmists. Primarily journalists and politicians.

Journalists are paid by advertisers. Advertisers pay for high traffic and big viewership/readership. The more people the journalists can get to pay attention to what they are saying the more ads they can sell and the more money they make. They know that they are in the entertainment business. If they can trigger a mood of worry, we will keep coming back for more.

Politicians are paid by the American people. The masses. If everything is great, then we will feel like we do not need their help. So it is in their best interest to dramatize a situation with scary language so that we feel vulnerable and afraid, and they can come to the rescue like a knight in shining armor. Here to save the day and give everyone money.

Walking around in a state of worry and fear will never allow you to think clearly which is exactly what is needed in a changing environment. Just as past expansions inevitably set up future contractions, the present contraction is setting up our future expansion. Of course the ones who will be poised to take advantage of it will be the ones thinking clearly now.

Opportunities abound. In a year or two the stories will start to come out about the visionary, courageous people who thought clearly and created powerful business offers in the midst of the firestorm. Why can’t you be one of them? You can bet I am working on mine.

Just Doesn't Make Sense

2009-03-18T07:45:00.000-07:00

Our current bailout strategy doesn't make sense to me, but I didn’t think I was intelligent enough to be the one pointing it out. Well I found someone who is smart enough and eloquent enough to explain why this fundamentally cannot work.

Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers said the US risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital.

Speaking to Bloomberg TV today , Jim Rogers said: “The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers. “That’s bad economics,” he added.

Rogers argued that American International Group should have been allowed to descend into bankruptcy, and he feels the same about similarly situated businesses. It just doesn't make sense to divert money from healthy, prudently-managed companies and plow it into debt-burdened companies that are being run badly at best and criminally at worst.

Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%

Don't Have Time for the Super Bowl?

2009-03-17T07:38:00.000-07:00

Commuting from one appointment to another yesterday I tuned in to the Dan Patrick Show in an attempt to catch some March Madness talk. Roy Williams, head coach of number one seeded North Carolina and one of the all time winningest coaches in NCAA basketball history, was being interviewed.

He was asked the poll question of the day which had something to do with "if you would miss the Super Bowl or not". He answered by saying yes he would, but that it may not mean much coming from him as last year was the first year in many, many years that he has watched the entire game. I was shocked as I thought the Super Bowl was the one sporting event that attracted even non-sports fans.

When pressed by Dan Patrick, Roy Williams explained that four hours is a huge block of time and that he cannot justify spending that much time watching a game when he has so many things he could be doing that time of year.

What became apparent to me is that Roy Williams is so busy pursuing his own dreams and goals, that he doesn’t have time to watch others pursuing theirs. No wonder some people are wildly successful and most aren’t even close.

I was reminded of a quote I keep on my desk:

“To give anything less than your best is to sacrifice the gift.” – Steve Prefontaine

How will you get it back?

2009-03-16T10:24:00.000-07:00

The total net worth of Americans was $51.5 trillion as of 12/31/08, down 18% in the last year, reaching its lowest level since 9/30/05 (source: Federal Reserve).

Those numbers seem low considering the Case Shiller home price index has dropped 16.7% in the last 12 months and the S & P is down 40.97% over the last year.

Whether it is 18% or more, new action must come from it. Some will live more frugally. Some will delay retirement indefinitely. Some will realize the job they are in simply will not provide them the income they will need to live the life they want and will go out and start new businesses. Some will begin investing in new ways.

What is your plan? How much net worth have you lost? How will you make it up? How much money do you need at retirement to live the life you desire? How about to maintain the current lifestyle you have?

Now is the time to build the strategy. Now is the time to take action. What has worked in the past will not work in the future. Time has elapsed and market dynamics have changed. A new philosophy for wealth accumulation must be built sooner than later.

Attend MIT for Free

2009-03-12T08:33:00.000-07:00

Over the last decade or so we have transitioned from a labor based economy (make money by the number of hours that you work and how fast you work them) to a knowledge based economy (where knowledge is the key to the kingdom). By knowledge I do not mean education or understanding. Knowledge is the superior capacity to think and act.

We live at a truly amazing time with the introduction of the computer and internet. Virtually everything you would ever need to make a fortune is free!

I recently ran across a site that MIT has offered called MIT Open CourseWare. On this site you can get access to almost every document, lecture note, presentation, and resource that you would as a student at MIT. It is all absolutely free. Truly unbelievable. They have a great business program along with math and science, etc.

How are you spending your time? By cutting out 1 hour a day of TV watching or Internet surfing you will free up 365 hours a year or 15 full twenty-four hour days or 45 eight hour business days. What could you learn and apply in an extra 45 business days this next year? I know I can learn and accomplish more.

To Me Boxing is Like Ballet

2009-03-11T18:39:00.000-07:00

“To me boxing is like a ballet, except there is no music, no choreography and the dancers hit each other.” Jack Handy, Deep Thoughts from SNL

Like the eloquent Jack Handy, I have learned to appreciate brutal spectacles like our current economy. It is like a good economy, except many are losing their jobs, people are hoarding their money and no one is happy.

At the same time, we need to be grateful for the actions it forces upon us. Americans are saving their money like we have not seen in years and years as the personal savings rate climbed to 3.2% in Q4 of ‘08, up from 1.3% in Q3 of ‘o8.

Home prices are dropping and making homes more affordable. As a real estate investor, even 12 months ago, it was impossible to buy a rental property and get it to cash flow with 20% down. There is a very generic rule of thumb for investing in real estate called the “1% Rule”.

In simple terms the gross monthly rent of a property should be at least 1% of the purchase price. A friend of mine is buying a duplex at around $300,000 and so the rents should be around $3000 a month, which they now are and wouldn’t have been without this market correction.

I love boxing, more than ballet if you can imagine a guy saying that…and I am learning to love corrections too!

Everything's Amazing, Nobody's Happy

2009-03-10T10:41:00.000-07:00

A good friend of mine sent me one of the funniest videos I have seen in quite some time. What a difference a slight paradigm shift makes.

"What we see depends mainly on what we look for." - John Lubbock

Share this with others you know that could use a different perspective.

Thank Your Lucky Stars It Ain't 1950

2009-03-09T10:25:00.000-07:00

I ran across a great post by Todd Ballenger of Borrow Smart Retire Rich. His post on Lifestyle Inflation today is very insightful. It breaks down how much we have to work at the average wage to buy typical household goods and compared today’s hours versus 1950’s. Pretty fascinating, check out the chart on the blog. Here is a little of what he said:

“Isn't it amazing, that we feel like we are working so hard for less. Yet, we've said before that the richest man in the world couldn't afford air conditioning. Who was that? It was Getty, and air conditioning wasn't invented in his life time. We take it for granted now don't we? It would take us almost 8 months of work to afford the same material goods in 1950, versus less than 2 months today. You would think we would be awash in 'free time', but our lifestyle inflates to absorb the new efficiencies.”

When things are not going the way we like, it is easy to get caught up in the trap of focusing on what isn’t going well instead of looking for what is going well. We really live at an amazing time in the world’s history and have so much to be grateful for.

“Happiness cannot be traveled to, owned, earned, worn or consumed. Happiness is the spiritual experience of living every minute with love, grace and gratitude.” – Dennis Waitley

“The hardest arithmetic to master is that which enables us to count our blessings.” – Eric Hoffer

2009-03-06T07:56:00.000-08:00

Reflecting on many of my failures, often times at the root has been a lack of persistence.

Calvin Coolidge declared, “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”

By understanding this, I still have not acknowledged the elephant in the living room…how do you increase persistence if you are not adequately satisfied with your current “persistence muscle”?

In one of the best all time books on accumulating wealth, Think and Grow Rich, Napoleon Hill states this formula for developing persistence.

How to develop persistence:

A definite purpose backed by a burning desire for its fulfillment
A definite plan, expressed in continuous action
A mind closed tightly against all negative and discouraging influences, including negative suggestions of relatives, friends and acquaintances.
A friendly alliance with one or more persons who will encourage one to follow through with both plan and purpose.

How clear is your purpose? Can you visualize it to the point that it appears real? Do you have a plan to achieve it? Is it written down? Is it reviewed daily? What are you watching and listening to? Who are you hanging out with? What are you reading? Who is holding you accountable? Do they believe in you? Will they let you off the hook?

A Japanese proverb states, “Money grows on the tree of persistence.”

Just Give Me the Friggin' Magic Bullet

2009-03-05T07:38:00.000-08:00

Over the last few weeks I have been listening to the 4-Hour Workweek by Tim Ferris during my workouts. (In a business course I am in they call that a full move, workout and learn, instead of compartmentalizing the two). I have really enjoyed his perspective on work, not as a “consume your life” activity, but as a “fuel for your life” activity.

While reading the book he pitches a product that he sells called Brain Quicken. It is a speed reading course that he raves about. Disregarding the conflict of interest, it is something I have been intrigued by for some time.

I have a stack of books on my nightstand that I cannot get through quick enough. Feels like too much to learn and too little time…so that led me to the investigation of speed reading. I researched some books and sites, one of the better appears to be mother of speed reading, Evelyn Wood. Lastly, I fortunatlely consulted with a friend who is an avid reader and relentless learner. He is the CEO of DotNetNuke and possibly the best thinker I have ever associated with.

He also was intrigued by the concept, did some research of his own, sent me the link to StraightDope that explains " you get the text's general drift while remaining largely innocent of the details, sometimes embarrassingly so."

More importantly, he made an observation that I should have made myself, “We need good research and a very respectable reference before we expend time (forget money) on this.”

We both realized that we have never met someone who is a great thinker and wildly successful in business, let alone life, that is a speed reader.

Mike Ditka, the head coach of the Super Bowl champion Bears said it best, “If things came easy, then everybody would be great at what they did, let's face it.”

Being a life long learner is not easy and it is that very fact that separates those who are willing to pay the price from the rest of the field. Knowledge wins in this new economy and to gain it takes time, energy, sacrifice and persistence.

The Assault of Sustained Thinking

2009-03-04T07:59:00.000-08:00

“No problem can withstand the assault of sustained thinking.” – Voltaire

I have found that critical, deliberate thinking takes great emotional strength and discipline. We have a society that leaves no room for thinking.

With the I-Pod going every spare moment, DVR’d TV programs at your disposal in excess, the internet and radio you could go a whole week without a minute of quiet time to direct your own thoughts.

Creating the space to think and then having the fortitude to intentionally direct your thoughts as opposed to letting them wander is a much more difficult practice than it appears.

I went through a phase, in an attempt to strengthen the power of my mind, where I would pick a topic and try to focus on it for the entire shower each morning. It is amazing the tangents you can get off on. If you don’t believe me, try it tomorrow morning. I would start out with a topic like golf. Next thing I knew my mind had meandered to beautiful scenery to Hawaii to beaches to surfing to sharks and my fear of them. I couldn’t believe that I was able to make that journey in 45 seconds, while consciously trying to focus just on golf.

Voltaire has spoken a profound truth, if we can learn to create some time each day to think and if we can learn to channel our thoughts in a focused direction, there is not a problem in our lives that can withstand the assault of sustained thinking.

Instead we have become lazy in hoping that our problems will resolve themselves without any real thought on our behalf. Critical thinking is key to effective action and satisfying results.

Should I Follow Charlie Brown?

2009-03-03T07:46:00.000-08:00

Charlie Brown once declared, “No problem is too big or complicated that it can’t be run away from.”

That certainly seems like the most sensible thing to do right now as the bad news appears to be stalking us in a majority of conversations, radio shows, newspapers, and news programs.

I am afraid we are not fast enough to run, so we might as well stand up and fight. We must look for the silver lining. There is great change in our world today and it is through this change that doors are opened.

It is change that creates the opportunity for new offers of help, new businesses and services.

My brother is in the high-end construction business and you can imagine how lucrative that is right now. Instead of spending all day lamenting over the old business model he had that has so cruelly been jerked out from under him, he started meeting with the influential people he knew to get their interpretation of what is to come. In one of these conversations, he was tipped off to an opportunity coming in the commercial real estate markets. Due to a mass exodus of businesses, shopping malls and office complexes are going to have vacancies like never before. In order to lease the space out again, the landlords gut them out, taking them back down to the shell to make them a blank canvas for the prospective tenants.

Without the change we are experiencing, that opportunity would not be there. What opportunities are around you that you may not have previously seen?

Trade My Rolls for Your Station Wagon?

2009-03-02T07:52:00.000-08:00

Don’t things change quickly? For the last 8-10 years it was the Donald all over TV with the hit Apprentice. The primetime show was laced with images of black jets with TRUMP painted in Gold, sleek helicopters, and fancy cars.

The Donald’s home town now has an emerging trend quite different than what you would expect… frugality. The NY Times reported that a real estate broker, Sharon Baum, is feeling like it is not in her best interest to be sporting a green Rolls Royce around town. She was quoted as saying “But now, with the recession, it’s not an appropriate time — nor do I want to be riding around in a Rolls-Royce.” The car was her trademark since 1996 and now she is concerned about the image she is portraying. Her plan is to garage the car and drive her station wagon around.

Saving is "En Vogue" now, which, based on statistics is a long time coming. In the third quarter of 2008, the personal savings rate was 1.2%. When the government started tracking the savings rate in the first quarter of 1952 it was 8.6% and it was 7.9% just 20 years ago in the third quarter of 1989.

Although, we have quite a hole to dig out of, it is nice to see frugality coming back in style. MSN Money reports a growing trend of second hand shoppers, some 60 million Americans! There was a day a couple of weeks ago where I would have lied to my mother about the fact that I was buying something from a second hand store. The smell alone makes me want to run the other direction. Now it is the cool thing to do.

Both of these examples are extreme and I am sure there is a more palatable middle ground...I will be looking for it. In the meantime, station wagons and second-hand clothes, here we come. I wonder if couches on porches are coming back soon too?

Infinite Self-Discipline?

2009-02-05T13:12:00.000-08:00

Ever feel like you got the short end of the stick when it comes to self-discipline or will power?

I ran across a series of experiments that indicate we have a finite self-discipline reservoir, not an infinite amount of self-discipline as we would like to think.

In one experiment, two groups were asked to come in to solve a puzzle. What they did not know was that the puzzle was insoluble. While in separate waiting rooms, a plate of fresh, warm cookies directly out of the oven was brought in and placed on the table in front of the group. They were informed that the cookies were not for them but for the next group, and to please refrain from eating them. A similar thing happened to the second group, except they were brought a tray of sliced cucumbers. After a number of minutes, the groups were ushered into another room to begin the puzzle. The experiment was designed to determine how long each group would persist on the puzzle before giving up. As you probably suspected, the group that had to withstand the temptation of the cookies lasted far less time on the puzzle than the cucumber temptation group.

In another experiment, one group of subjects was asked to hold their hands under ice water for a specified period of time. They performed significantly worse on a series of subsequent proofreading tasks than a group that had not been subjected to the ice water challenge.

These, as well as other experiments, illustrate convincingly that we all have less self-discipline than we realize and therefore we must call upon it selectively. Even small acts of self-control use up this limited reservoir of energy, leaving us less energy for the next task.

It does not mean that we are doomed to a life of mediocrity, it does mean that we must create habits. Once established, habits no longer require energy or self-discipline to perform. They actually take energy to break. The key is to methodically build a life of productive habits…one at a time. The temptation will be to start a number at once, like New Years resolutions. Use your precious, limited energy to build successful habits, one by one.

What if you established one new habit each quarter this year? Imagine the different results you would see in life.

The gates of history swing on small hinges.

Is It Coincidental

2009-01-14T22:23:00.000-08:00

My wife and I just moved out of our condo and as we made one last trip down the hallway I was reminded of an observation I had made many mornings.

Of the 10 or so units on our floor, six or seven received the New York Times, three received the Wall Street Journal, and only one received the local Oregonian newspaper. In the two other buildings we had lived in the only paper I had ever seen was the Oregonian.

The difference became apparent that in our most recent condo we lived on the top floor and the median income was significantly higher than the other two buildings where we did not live on the top floor.

I have since began paying closer attention to what different income classes read and it varies greatly, one class from another. Yet within the income class, birds of a feather flock together.

What are you reading? Does it even matter?

I am certainly not suggesting that reading the right newspaper is the sure path to riches...

For a great Japanese proverb states, "If you believe everything you read, better not read."

The important questions is, "what else do “they” do differently?"

Do What the Billionaire Does

2009-01-12T12:39:00.000-08:00

In December Billionaire Phil Ruffin Sr. bought MGM’s Treasure Island Casino in Las Vegas for $775 million, reported the Wall Street Journal.

“I knew to build a 3,000 room hotel today would cost $3 billion,” Mr. Ruffin told the Wall Street Journal. “I think it is a good value.”

Lesson 1 – Know Your Numbers

Mr. Ruffin, who made his first fortune leasing gas stations and convenience stores, was one of only a handful of potential buyers who had the cash on hand to complete a purchase.

Lesson 2 – Cash is King…”No man's credit is as good as his money.” ~E.W. Howe

Mr. Ruffin is buying back into Vegas after having sold his previous venture at the height of the city’s real-estate boom.

His Las Vegas record has so far been a lesson in restraint, and impeccable timing. In 1998 he bought his first Las Vegas casino, the New Frontier – a low rent property mired in a six-year union strike – for $165 million. Less than a decade later, he sold it for $1.24 billion at the height of a Las Vegas land-buying frenzy.

Lesson 3 – Buy When No One is Buying and Sell When No One is Selling

Years earlier, while other Las Vegas operators took on billions in easy debt to outdo one another with ever-more extravagant gambling palaces, Mr. Ruffin cancelled his own $2.7 billion plan to tear down the New Frontier and build a new resort in its place. “It wasn’t a difficult decision because the numbers didn’t work,” he said in a phone interview. “I’m pretty good at math.”

Lesson 4 – If the Numbers Don’t Work, Don’t Do It

When asked about the recent email promotion Treasure Island recently sent out for $49-a-night rooms he laughed and said, “We know it is going to be soft for a couple of years. That’s OK. We won’t have any debt, so we’ll be OK. That’s what gets everyone in trouble, they pile on that debt.”

Lesson 5 – Debt Closes the Doors of Opportunity

4.50% Interest Rates…Hold Your Horses

2008-12-11T12:59:00.000-08:00

A report leaked last week that the Federal Reserve was considering lowering the 30 year fixed rate to 4.50%, over a percent lower than the current market, in an effort to stimulate home buying.

The Wall Street Journal reported the following:

- “The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%.”

- “The plan remains in discussion and may not be made final before the Bush administration’s term ends in January.”

- “The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.”

- “Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.”

How would this happen…and would it work?

Fixed mortgage rates are tied to Mortgage Backed Securities (MBS) which are similar to stocks except that they are tied to mortgages as the security whereas a company is the security for a stock. Both stocks and MBS are priced based on supply and demand. The more investors want a stock the higher the price goes and vice versa. MBS function the same way.

Because the price is determined by supply and demand, the Fed would have to artificially drive the rates down to 4.50%. In plain terms, they would pay to get them down. The only source of cash I know about would come through borrowing or printing the money needed to pay the difference between the current market rates and the new target rate.

When the government borrows and/or prints money, it is inflationary. Inflation simply means that the dollar you have now will not go as far in the future because it is worth less. By artificially driving down rates they will be stoking the inflation fire.

The reason this is bad for interest rates lies in the mechanics behind how rates work. As mentioned before, rates come from an investment vehicle called MBS. Investors who choose to put their money in MBS instead of stocks do it because they are looking for a safe, fixed return. If the return they want is say 4.50% and inflation strikes, the return of 4.50% is actually worth less than that. In other words, if your 4.50% investment paid you $1000 month and the inflation rate goes up, due to the government borrowing or printing money (which it will), then your $1000 will only buy you $900 worth of goods and services. Now the investor needs a 5% return to buy the equivalent to $1000 worth of goods and services. This is a vicious cycle and will work against the very mechanism used to artificially drive down rates.

In summary, can the government artificially drive down rates? Yes.

If they do, will it last long? I do not see how it could based on the mechanics of the market I have described above.

If they do it, who will benefit? Because it will take money to drive the rates down the Feds would need to identify some parameters on what loans they would offer this on. It will certainly only be purchase loans as mentioned in the WSJ and I speculate that it will be for a specific target market, maybe a certain loan amount range and quality of buyer. They do not have the money to open it up to all loans of any size or type and any and all borrowers.

If it happens, great. If it does not, rates are fantastic now and more importantly, the big money is made on a purchase through negotiating the right price, not a little lower interest rate. What makes buying now so appealing is the phenomenal deals you can get. If 4.50% comes and everyone jumps in, don't you think sellers will hold more firm on their prices with buyers swarming everywhere?

Don't Be a Fearmonger

2008-12-09T10:02:00.000-08:00

If you look around you will notice that nearly everyone around you is scared. They are not sure what will happen with the economy and more importantly their jobs. Will they ever be able to recover from the 45% haircut the stock market drop has given them?

A very insightful article came out in the New York Times on Sunday titled In Hard Times, Fear Can Impair Decision Making. It is written by Gregory Berns, a neuroeconomist and directs the Center for Neuropolicy at Emory University. In the article he makes the following observations:

“And while fear is a deep-seated and adaptive evolutionary drive for self-preservation, it makes it impossible to concentrate on anything but saving our skin by getting out of the box intact.”

“Ultimately, no good can come from this type of decision making. Fear prompts retreat. It is the antipode to progress. Just when we need new ideas most, everyone is seized up in fear, trying to prevent losing what we have.”

Take some time to observe your own behavior and test what he is saying. It is certainly true with me. Now is the time to go against the grain and create opportunities for ourselves. You may be thinking, easier said than done. You may be surprised.

“The most concrete thing that neuroscience tells us is that when the fear system of the brain is active, exploratory activity and risk-taking are turned off. The first order of business, then, is to neutralize the system.”

“This means not being a fearmonger. It means avoiding people who are overly pessimistic about the economy. It means tuning out media that fan emotional flames. Unless you are a day-trader, it means closing the Web page with the market ticker. It does mean being prepared, but not being a hypervigilant, everyone-in-the-bunker type.”

I would suggest a couple of more things that you can do to “neutralize the (fear) system”:

Spend 10-15 minutes each morning visualizing your ideal life
Spend 20-30 minutes reading something uplifting (personal growth book, poetry, human victory story)
Workout for at least 30 minutes per day
Start a gratitude journal, taking careful inventory of all that you are blessed with
Set goals and clear daily and weekly objectives so you have a clear path of the life you are designing. This will take you out of the helpless victim role that often accompanies fear.

My Wife Was Right... Again

2008-12-08T18:29:00.000-08:00

As is true to the relationship my wife and I have, she was right, but I wouldn’t accept it until someone else told me.

I had tried to get her to read more business and personal growth books for a number of years as she read a bunch of stuff that would surely never make anybody any money. She reads a wide variety of literature including the classics and poetry.

Wise old me had spent the last decade reading the business bestsellers along with every financial book I could find. Although I have learned a lot over the years, it was not the secret formula.

It was then that I was introduced to an article in the New York Times titled C.E.O. Libraries Reveal Keys to Success.

Michael Moritz, venture capitalist and owner of a huge library, says he can’t discard books.

The article is summed up best by a line in it that declares, “Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete.”

To be really wealthy I cannot copy or mimic what others are doing and expect to get top 1% results. In other words, if I spend my time attempting to do what others have done I will always be one step behind. I must learn to think for myself.

What do the best thinkers in our country read?

Read the article and see for yourself, but don’t tell your wife that this is where you learned it!

I.O.U.S.A.

2008-12-06T16:25:00.000-08:00

If money plays a role in your life then I highly suggest watching the movie I.O.U.S.A. Roger Ebert said, "...it accomplishes an amazing thing. It explains the national debt..."

Visit the official movie website

Reuters said "I.O.U.S.A." "may be to the U.S. economy what 'An Inconvenient Truth' was to the environment."

We must educate ourselves on the forces that will determine our ability to live the American Dream.

Watch the 2 minute trailer

Or watch the Byte Sized 30 minute version of the movie

http://www.youtube.com/watch?v=O_TjBNjc9Bo

To get involved I recommend

http://ww.pgpf.org/getinvolved/signup/

Seems So Obvious

2008-12-04T17:05:00.000-08:00

In every choice there are two elements of the equation, pain and pleasure. In this lies one of the great secrets of life: we have the free agency to choose which one comes first with the great caveat, the element not selected will always come second and last longer. Let me say it another way, the element we choose first has a short duration and the second element will last far longer.

Here is what I mean; not long after I was introduced to this principle I was driving home from Seattle to Portland with a few colleagues. A short distance into the drive I pulled over to get some gas. I broke from the lively discussion on this very topic to go into the quickie mart and proceeded to buy a 44 ounce soda and a 3-packer of cupcakes. You know the really healthy Hostess type. Back in the car and two and half cupcakes down it dawned on me that I had just scheduled pleasure (sugar high) first with the pain (gut ache and life of flab if continued) to follow. What was just as eye opening was that it did not matter whether I was aware of the principle or not. It is a mechanism or principle that functions just the same.

What if I had scheduled pain first by way of water and a Power Bar? Consequently I would have benefitted from long lasting energy and a show stopping six-pack, pleasure! Far better decision.

This principle is highly active and visible in personal finance. I can schedule the pleasure (new outfit from Nordstrom’s) now and the pain (lack of savings for retirement and/or college fund for children) will most certainly follow and last well beyond the awe inspiring confidence of some new digs.

Where in your life are you ignorantly scheduling pleasure first, unaware that a long period of pain is waiting to pounce?

Take an inventory of your personal finances and identify at least one change you could make today by reversing the order of pleasure and pain.

From experience, the short term pain of saying “no” results in long lasting pleasure in the form of great peace and possibility.

Seven Simple Rules to Follow in Life

2008-12-01T09:42:00.000-08:00

Joshua Wooden, father of the great John Wooden, gave him a little white note card for his elementary school graduation (back then, graduation of elementary school was a big deal as many did not graduate high school). He wrote the creed he had so often shared with his kids:

Seven Simple Rules to Follow in Life

1. Be true to yourself

2. Help others

3. Make each day your masterpiece

4. Drink deeply from good books, especially the Bible

5. Make friendship a fine art

6. Build a shelter against a rainy day

7. Pray for guidance, and count and give thanks for your blessings every day

As he read the card his dad said, “Johnny, try and live up to these and you’ll do alright.”

In a world that is ever-changing and at a rapidly increasing pace, I have begun a quest for principles that are timeless. What can I be sure of in building my foundation?

This was advice given before 1920 and is quite possibly more valuable today than it was then.

It helped build a foundation for John Wooden that led to 53 years of marriage and made him the greatest college basketball coach of all time. He led UCLA to win 10 National Championships in 12 years.

What would the integration of these principles do for your family, career and life? I have no doubt that they will make me a better, more successful and happier person.

Lifetime Winner

2008-11-24T12:02:00.000-08:00

“When you improve a little each day, eventually big things occur. When you improve conditioning a little each day, eventually you have a big improvement in conditioning. Not tomorrow, not the next day, but eventually a big gain is made. Don’t look for the big, quick improvement. Seek the small improvement one day at a time. That’s the only way it happens—and when it happens it lasts.”

- John Wooden

This quote is coming from arguably the best college basketball coach of all time. He won the National Championship 10 out of 12 years at UCLA! What a philosophy to live by.

I don’t know about you, but the “get rich quick” or “buy now, pay later” messages of the day are sure seductive. They certainly offer an easier road to travel. (That LypoDissolve pill that makes all of your fat magically disappear with no change in diet or without ever working out is tempting, but come on, really?) No hard work, self discipline, or persistence required.

After years of reflecting on these two varying philosophies I am reminded of a statement from a business course I took:

All interpretations are valid; however, they are not equally powerful.

As I reflect on all of the people I most admire, none of them were a one hit wonder. They were people who persevered. They kept after it, never giving up. It is through the very un-sexy work of discipline and persistence where the most valuable attributes are developed. It is these very attributes that build a foundation for future success. This cycle, if repeated over the years produces lasting success.

Don’t shirk the hard work if you really want to be a lifetime winner!

College Costs What?

2008-11-21T14:05:00.000-08:00

College costs keep rising. How much and how do you possibly fund it?

First, the newest numbers:

On October 29, 2008, the College Board released college cost figures for the 2008/2009 academic year in its Trends in College Pricing Report. Not surprisingly, costs went up in every category. Here are the highlights: To view the 2008 Trends in College Pricing report, Downloand College Cost 2008.

Public colleges (in-state students):

Tuition and fees increased an average of 6.4%

Room and board increased an average of 5.2%

Total average cost for 2008/2009: $18,326

Public colleges (out-of-state students):

Tuition and fees increased an average of 5.2%

Room and board increased an average of 5.2%

Total average cost for 2008/2009: $29,193

Private colleges:

Tuition and fees increased an average of 5.9%

Room and board increased an average of 4.8%

Total average cost for 2008/2009: $37,390

"Total average cost" includes tuition and fees, room and board, books and supplies, transportation, and other miscellaneous costs.

The College Board stated, however, that average cost is not necessarily representative of what most college students pay. The Board noted that there is considerable variation in price among institutions, and that almost two-thirds of undergraduate students enrolled full-time receive grants that reduce the actual price of college.

I suggest two different ways to insure you are prepared:

1. Maximize an ESA College Savings Fund – ESA stands for Education Savings Account. ESA allows for a maximum annual contribution of $2,000 per student. The earnings in the account grow tax-free as long as distributions are used for eligible expenses, which are not limited to college costs.

$2000 invested annually at 8% for 18 years equals $74,900

2. Buy a rental property –when your child is young, buy a property for multiple reasons:

§ it will appreciate at 3-5% for ten plus years before college money is due

§ rental rates will increase at 3-5% producing some cash flow to help with expenses

§ use it as a teaching tool for your child; help them learn to care for it, find and screen renters, manage the finances of the property, pay taxes, etc. This will be a life altering experience that will give them a leg up in a financial education deprived world we live in

$200,000 house appreciating at 4% over 10 years will be worth $296,048

$1200 in rent increasing at 4% over 10 years will climb to $1776

A Cheesy Sweater?

2008-11-20T07:55:00.000-08:00

Years ago when asking my mother what she wanted for Christmas I was perplexed at her request. She said she wanted us three kids to memorize a quote on attitude by Charles Swindoll. It was a quote that I had read a number of times over the years by virtue of seeing it every time I went to the fridge.

In my infinite wisdom, I concluded that memorizing a quote was not a good gift, what she really would enjoy was a nice sweater from the Gap. I never spoke to my younger brother or sister about this and had frankly forgotten the original request.

Christmas morning rolled around and I of course watched her open a cheesy sweater that she would not be caught dead in now. She faked her satisfaction, gave me hug and we were on to the next gift. As we went around the circle it was time for my brother and sister to give their gifts to mom. In unison they recited the cherished quote,

"The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company...a church...a home.

I am convinced that life is 10% what happens to me and 90% how I react to it. And so it is with you...we are in charge of our attitudes."

With tears running down her face she thanked them for their effort. Looking back, it is now crystal clear that the emotion she was feeling was her ability to foresee the lasting impact on my siblings of memorizing those words. What a valuable lesson from a loving mother.

With so much going on around us that we cannot control, the empowering words of Charles Swindoll ring in my ears almost daily. We are in charge of our attitudes!

You Won't Know Unless You Measure

2008-11-19T11:22:00.000-08:00

I have a new practice of inviting at a minimum, two influential people to lunch every month. Yesterday I took a guy to lunch that is an ex-accountant. 30 years ago he left one of the big eight firms (at the time) to be a partner and acting CFO and COO of a Cummins distributorship. 3 years ago, after years of diligent effort, he and his partner sold the business. It was rumored to have sold for well over 100 million. Not bad, eh?

Over lunch, I asked him, "What was the factor that most contributed to your success?" He shared a philosophy that they lived by:

You don’t know what you don’t know

You can’t do what you don’t know

You won’t know unless you measure

If you value it, measure it

If you don’t value it, don’t measure it and don’t do it

They used this philosophy to dramatically increase profit margins in every department of the company.

That is an extremely pertinent and powerful philosophy if applied to personal finance as well as business. A vast majority of people have no clue what their numbers are. I’ll prove it.

- How much money did you spend on gas last month vs. what your projections were?

- How much money did you spend on entertainment last month?

- What percentage of your income did you invest or save last month? how much was that? (if the number is 0%, don’t get thinking you are too smart for knowing your numbers=)

- What is your net worth? what is the year over year increase or decrease?

- How much money will it take for you to retire at your desired retirement age to maintain the lifestyle you currently have?

How to apply the philosophy to personal finance:

1. Budget – track your expenses (all of them), eliminate unnecessary “wants”, make sure your “needs” are less than what you earn, go to a cash system and when the money is out, stop spending (McDonald’s per transaction sale went up 47% when they began accepting credit cards)

2. Net worth – what is the value of all of your assets minus all of your liabilities. The difference is your net worth. This is an important number as it will be an indicator of your capacity to stop working someday

3. Capital at Work – how much money is working on your behalf each day? This is determined by summing up the value of your stocks, bonds, and investment accounts.

Stay tuned for a more detailed explanation of each – how to track, utilize and improve them for the sake of improving your financial situation and ultimately reaching your financial objectives.

Saved By Zero

2008-11-18T19:12:00.000-08:00

While watching Monday night football last night I couldn’t help but laugh at Toyota’s new car commercial. The catchy tune they sing during the commercial consists of a chorus only, with the words “saved by zero” sang over and over again promoting their new 0% financing on a majority of their models.

I am not sure if they mean that their revenues and therefore 4^th Qtr will be saved if enough people buy because of 0% financing or if they are saving “us” by providing 0% financing?

In researching new car depreciation for this entry I discovered that a vast majority of experts agree on depreciation figures. In year one you can expect 15-20% depreciation and 10% each year after that.

Here is what Toyota’s “Saved by Zero” financing is really costing:

brand new $32,155

year one $24,000 value

year two $21,600 value

year three $19,440 value

year four $17,496 value

To confirm, I priced out a new Camry on the Toyota site and also found a used one on AutoTrader.com. The results are strikingly similar:

Brand New Camry XLE fully loaded $32,155

2004 Camry XLE fully loaded $16,150

Interesting that even a Toyota Camry, a very reliable car, keeps pace with average new car depreciation rates.

Your “Saved by Zero” deal costs you $333.44 a month or $76.95 a week in depreciation.

A lot can be learned with a little research so that you can decipher who is really saving me and who is looking to save themselves.

Cash is King

2008-11-17T13:57:00.001-08:00

A couple of years ago a wise, old, financial mentor of mine said to me after reviewing my financials, “I am very impressed. You have built up quite a net worth at a young age and are on a path to go far in life. However, if there is any advice I could give you it is that cash is king!”

At the time I had good equity in a growing company, lots of real estate holdings and very little cash reserves. Although I understood what he meant, I did not know what he meant. I use the word know to mean - understand it to the point of creating powerful thought and action.

Fast forward three years. What if I had taken his advice to heart and been on a quest to accumulate cash? Everything is on sale right now!

Real estate as evidenced by the Case Shiller report shows discounts approaching 20% off in the nations largest 20 cities.

Stocks and bonds (at home and abroad) have had their prices slashed dramatically this year:

Dow Jones Industrial Average -- over 35% down

Nasdaq -- over 40% down

S & P 500 -- over 40% down

Emerging Market Stocks -- almost 60% down

REITS -- over 40% down

Welcome to a buyers market without any buyers!

Very few have cash right now. They may have equity but cannot get to it. This is the time you want to be buying, in a buyers market without any buyers. If you have cash, now is the time to be building your fortune like those in the time of the Great Depression did.

Warren Buffet was quoted as saying, “When the prices are right, I can buy companies faster than Imelda Marcos can buy shoes.”

Lessons I will apply the next cycle:

1. Don’t get greedy when everything is racing up – remember Nordstrom has the Twice Yearly Sale, real estate and stocks have a Twice a Decade Sale

2. Take money off the table - it is not necessary to go all in, every hand. get comfortable with the coffers full of cash, poised for the next big sale

3. They are called cycles for a reason – prices go up and prices come down, round and round they go. be a buyer in the down cycle

4. Be a contrarian!

5. Start now - now is the time to begin preparing for the next great opportunity. be a student now. build your wealth habits now.

A Crisis is a Terrible Thing to Waste

2008-11-15T16:24:00.000-08:00

“A crisis is a terrible thing to waste”, said the CEO of Merck, Richard Clark recently.

What a refreshing statement to hear!

In Chinese philosophy, the concept of yin and yang is used to describe how seemingly opposing forces are bound together, intertwined, and interdependent in the natural world, giving rise to each other in turn.

I believe this to be true. At a time of great danger and fear lies one of the greatest opportunities to build wealth we have seen in decades.

Are you looking for opportunities or hiding under your kitchen table? Is it possible this is the break you have been waiting for?

Did you know that there were more millionaires created per capita during the Great Depression than at any other time in our country's history?

Maybe it is time to adjust your belief systems to a more powerful way of thinking. You will find exactly what you are looking for. Are you looking for opportunities or looking for danger and despair?

Chains of Habit

2008-11-14T00:38:00.000-08:00

“Chains of habit are too light to be felt until they are too heavy to be broken.” - Warren Buffett

It is my belief that a vast majority of the economic struggles we are experiencing today have been brought on by poor habits and a disregard to the fundamental laws of money. The NY Times reported that “For decades — from the 1950s through the 1980s — Americans spent about 91 percent of their income, on average, and put away the rest. In the last few years, they have spent close to 99 percent and saved only about 1 percent.” Recent government data shows the personal savings rate has been negative for the last two years. At some point the merri-go-round has to stop.

Where would we be today if we had adhered to the Five Laws of Gold from the classic book, Richest Man in Babylon?

FIVE LAWS OF GOLD

Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family
Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep
Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment

Did you cause Alzheimers?

2008-11-13T16:57:00.000-08:00

It seems that with each day comes a barrage of negative news. The Dow finished down 411 points or 4.7% yesterday at 8282. Initial Jobless Claims, a good leading indicator on the health of the job market, showed 516,000 new claims, far worse than expectations of 479,000. Additionally, the Continuing Jobless Claims reached 3.89 million, their highest level in 25 years. GM’s stock price slid to $3.08, teetering on the edge of the abyss, when just 8 years ago it was worth over $90 share and the end of 2007 it was over $40 share.

How important is it to control your emotions and mood?

Did you cause Alzheimers?

Epidemiologist David Snowdon did a study of 678 nuns in the School of Sisters of Notre Dame Congregation. Snowdon set out to study the factors that differentiate nuns who eventually got Alzheimer’s disease from those who did not. All of the nuns he studied were required to write a personal essay when they came into the order in their early twenties. Upon analysis, Snowdon discovered that those nuns whose writing expressed a preponderance of positive emotions tended to live longer and more productive lives. Nuns with the highest number of positive-emotion sentences had half the risk of death at any age as those with the lowest number of such sentences. This is consistent with the findings from several other studies suggesting that a history of depression – the most insidious of all negative emotions – increases twofold the likelihood of eventually developing Alzheimer’s. These findings deeply influenced Snowdon not just professionally, but also personally. “I now make a conscious effort to regain my physiological balance quickly after an upset,” he explains. “I try not to stay stuck in negativity. My goal is to return to its normal, healthier state as soon as possible.”

What can you do about it?

Some simple suggestions are: Do an inventory of your influences. Who are you spending your time with and what is their mood? What are you listening to and what are they saying? What are you reading? What are you watching and what is there message and motive?

Surround yourself with people who are positive. Not people who are blindly optimistic, but people who are realists looking for the opportunity in all they see. Read uplifting material. Turn off the TV. Listen to books and programs that will increase your capacity to think and act. Work out.

The great James Allen wrote in his bestseller, As a Man Thinketh, “As a being of power, intelligence and the lord over his own thoughts, man holds the key to every situation, and contains within himself that transforming and regenerative agency by which may make himself what he wills.”

Big Hat, No Cattle

2008-11-12T17:09:00.000-08:00

Big hat, no cattle!

This is a phrase from The Millionaire Next Door, by Dr. Thomas Stanley referring to the people that put on the millionaire façade. Cars are great examples of that.

In the spirit of transparency, I am a car fanatic. I love them. I enjoy looking at them, washing them, sitting in them, and driving them. This is something that started in high school and I have become progressively more obsessed over the years.

What I had never stopped to do was to calculate the cost of financing a car. Dave Ramsey recently quoted a study that revealed the average American has a $484 monthly car payment that they never get rid of. This means that as soon as it is paid off they go out and buy a new model starting the fun all over again. I became curious what this would cost over a lifetime.

For ease of calculations I have rounded the payment up to $500 month. I have estimated an 8% return on the money if it had been invested instead:

Over 30 years you would have made $180,000 in car payments. Had you chosen to invest those monthly payments instead, you would be sitting on a $679,699 asset.
Over 40 years you would have made $240,000 in car payments. Had you chosen to invest those monthly payments instead, you would be sitting on a $1,554,339 investment.

Needless to say, our car is for sale. For $1,554,339 I can learn to enjoy a used car smell!