From the book: Thoughts on Planning
There is an entire industry of get rich quick schemes out there, preying on those who are desperate to find an easy way to succeed financially in their personal lives. Maybe you enjoy spending large sums of money on seminars about real estate and options investing or get a big kick out of persuading your friends and family to buy and market products and services through multi-level marketing. If that’s you, then fine, but you don’t need to do this. All you really need is a financial plan.
But most American’s won’t take the time to sit down, focus, and decide what it is they want to achieve from a personal financial standpoint. There are lots of good excuses for putting this off: It’s complicated. It’s hard to find someone you can trust to help. And it’s hard to find the time in our busy work and family lives. If you don’t think you have time, then you’re right, you are running out of time. You’ll have to make time because we all lose a little more of this precious resource every day, and time is a critical component in the time value of money concept we will discuss later as the lynchpin to your personal financial success.
Along the way you will find that there are a lot of advisors and companies out there who are not worthy of your trust. In this book, I’ll teach you how to distinguish those who can truly help
you from those who are just wanting to sell you their expensive products. As life happens, there are a multitude of things that pull at our financial resources. Sometimes it’s hard to know what to do. I’ll help you frame and prioritize your goals so you can make good decisions. You will also learn how to expect the unexpected, and I’ll help you be better prepared for some of the bad things that you and your family may have to deal with. Also, in our quest for financial success, we can sometimes be our own worst enemy. There are tricks and systems I can teach you that will help you manage savings and debt in a way that enhances rather than detracts from your long-term goals.
This book is designed to provide a guide, in basic English without all of the fancy financial terms, with the right information you need to step up to the plate with confidence. With the basic
knowledge I’ll provide, once you step up it should not be that hard from there. But stepping up is hard. For over 25 years, I’ve been working with people just like you to help them achieve personal financial success. By far the greatest trap is not ever starting and, therefore, never having a plan until it’s too late.
From the book: Thoughts on Spending and Saving
In the personal financial world, there are net spenders and net savers. Net spenders pay interest. Net savers make interest. Net spenders can never seem to catch a break. The car breaks down or needs tires, or a large medical expense pops up out of nowhere. And boom, the net spender just falls behind even more. The net spender usually is oblivious to the real reason for their financial woes; they think it’s their circumstances, not their financial habits, that are to blame.
To the contrary, the net saver experiences many of the same hardships but is able to adequately handle these expenses with cash savings. Same circumstances, but the net saver feels blessed that they had the resources available to handle their circumstances Rarely does the net saver realize how important their saving habits were to the pleasant financial outcome they experienced when under duress.
If you are a net spender, understand that the inertia of your financial habits is going to be very hard to overcome, and it may take awhile. Regardless, the first step is to start saving cash reserves.
The first step is not to pay down debt with every extra penny you have. You may need car tires, or maybe shoulder surgery, or something in the near future. If you don’t have cash savings, all that debt paydown was for nothing, and the endless debtor cycle will continue with no end in sight.
I know it’s sad to think of it this way. But there are people who learn how to achieve financial success, and there are those who never achieve financial success. Certainly, circumstances come
into play. But let’s be honest; it really just comes down to whether or not we spend more than we make or make more than we spend. If you set up an automatic cash savings plan, you are much more likely to make more than you spend, so do it now.
From the book: Thoughts on Investment Diversification
We can successfully diversify away a lot of the risk and noise created around individual stocks in the stock market pond, but the waves of up and down momentum are something we definitely feel and must contend with. We must think long term because the frantic movements smooth out over days, weeks, months, and years into mountain graphs of long-term growth we can clearly see over historical periods of time.
But it’s easier said than done. Maybe this conceptual illustration will help. It’s not uncommon for any number of well-known stocks to trade 10 or 20 million times every day. Each trade represents a new consensus on the stock’s value between a buyer and a seller, so that consensus happened 10 million or so times at various prices during the course of the trading day. Now imagine you put your house on the market this morning, and by 4 p.m. Eastern Standard Time, it had changed hands 10 million times. That’s potentially 10 million people climbing in the attic, inspecting your sprinkler system, and running market analysis to determine value.
Do you think by, say, the millionth transaction that just about every known defect and market factor affecting your home value had been uncovered? Surely.
Now let’s say this crazy activity continued day after day, week after week, month after month, and year after year. We would then have to consider your home a marketable security, with extreme liquidity. It’s still a home, but the price is being determined instantaneously throughout the day, based upon known changes and market factors.
My point is sometimes we assume an investment like a home to be safer than it really is just because its price does not appear to fluctuate. But the price would fluctuate if it had the same marketability as a stock in the stock market. To invest properly for long-term returns, we must allow all of this frantic trading to occur below the surface and try to ignore it as best we can. Later, much later, we’ll be glad this liquidity exists because it allows us to easily convert our investments into income for retirement.
