38 random thoughts on building prosperity

APOCALYPSE
If you were going to sit down and write a list about building prosperity, what would be on your list?
Here are 38 random lessons I’ve learned about making money. Not one is set in stone, and some of them are my own goals. Almost all of them, though, are critical to building prosperity for anyone.

  • Spend less than you earn is not always the FIRST way you should think. “Spend less than you earn” and “earn more than you spend” could be the basis of a much shorter list: the only two things you need to know to be wealthy.
  • Pay yourself first. When money comes in (paycheck, client payments, alimony, whatever), put the first 10% in savings until you have an emergency fund of at least $1000. Then put the first 10% into paying off any debt you have. After that, put the first 10% into retirement accounts or investments. No excuses. Ever. Make do with the other 90%, no matter what. NO MATTER WHAT.
  • Invest early and often. $100 invested at 8% for 50 years will be worth $4,690. $100 at 8% invested for 40 years will be worth $2,346. 10 extra years means twice as much money. Start investing today.
  • Buy and hold. You are not smart enough to time the market all the time. You may win some and lose some, but unless you are incredibly lucky – or smarter than an investment bank with 1000s of employees studying the market full-time – you will probably not be able to time the market much better than a mutual fund.
  • Don’t let STUFF rule your life. If you are 25 years old today and buy an iPhone for $399, that would have been $8,700 when you retired. But at least 40 years from now you’ll still have that iPhone. Right.
  • Don’t go into debt. If you go into debt, even if you manage to pay it all off someday, you will be starting out significantly behind even the laziest, slowest investor who never incurred debt in the first place. Debt will destroy your future.
  • Get educated, and keep learning throughout your life. Do you think Warren Buffet stopped reading about finance and taxes and economics when he finished school in 1951? Do you think he chills out in front of the TV watching Gray’s Anatomy or playing with his Wii, or do you think he’s educating himself right this very minute?
  • You shouldn’t try to keep up with the Joneses. It’s a race that has no winners, only losers.
  • A penny saved is a penny earned…thanks to the miracle of compound interest it’s actually a nickel earned.
  • You don’t need that. I told myself that I really needed a brushed nickel mortar and pestle for crushing spices. I didn’t. Every time you go shopping, write down anything you see that you NEED. Wait until the next time you go shopping to get it – because by then you’ll probably realize that you lived without it.
  • Getting married and staying married is a good financial move. Losing 50% of your money and buying a second home in one year is a tough way to grow wealth.
  • Live somewhere with good public schools. Private schools are fine if you want it for religious or social reasons, but the simple fact is that you are paying for your child’s education twice: once in private school tuition, and once in taxes.
  • Don’t gamble. If you feel the urge, just send me a donation instead. Either way you’ll be giving your money away.
  • Money is replaceable. Time is not. Money that is wasted can be replaced, because technically there is an infinite supply of money that you can acquire in your life. Actually acquiring it may be tricky, but if you waste $10 today you can think of ways to generate alternate income tomorrow to replace it. Time, once wasted, is gone. If you watch 2 hours of TV a night starting at age 21 and living to age 78, you will have watched TV for 24 hours a day, 7 days a week for 4 years and 9 months of your life. Think about that.
  • You cannot spend too much on your health. This may be one of the oldest cliches in the book, but if you don’t have your health, you don’t have anything.
  • Complaining is counterproductive. Move on. All of the time most of us spend complaining – and this one is a HUGE problem for me that I’m trying to overcome – is time that we could spend on a million different positive things: exercising, learning, playing, cooking, laughing… the list goes on and on.
  • Write down your goals.
  • Half the battle is preparation. Going half-cocked into any venture is a sure recipe for disaster.
  • Athletic ability or musical talent or fantastic good looks are great ways to become wealthy. For the rest of us, brains will have to make up the difference.
  • Inherited wealth gives some people a head start, but we are all working – on average – within a 78 year average lifespan. You and Bill Gates both started out as naked, squalling babies with approximately 28,470 days to spend on this planet; he didn’t have any advantages in terms of 27 hour days. He’s making the most of his time (at least as far as wealth, I can’t speak to his personal development…)
  • Doing what you love is a good way to be happy. It is not always a good way to be rich. You don’t have to be rich to be happy, but not being rich doesn’t guarantee you’ll be happy, either. Do something you can tolerate for a job. Do something you love for a hobby.
  • Persistence is admirable…to a point. After that, it can become stupidity. After that, it can become dangerous.
  • Your first job out of school will set a pattern for your entire life – if you let it.
  • Chasing gains in the market is a sure way never to catch them.
  • Investing in the stock market is very difficult, and there are millions of people better at it than you – don’t kid yourself into thinking you are smarter than 99.9999% of the investors there.
  • Buying a home is satisfying, but it costs a lot more than just the cost of the house.
  • The biggest money drain in your life is your own lack of self-control.
  • Don’t borrow money from friends or family, and don’t lend money to friends or family. Ever. Unless you do it through some sort of P2P lending website.
  • Personal finance doesn’t have to be boring, but often it is – a lot of it has been said before.
  • Mutual fund performance is variable, but fees are forever.
  • Dividends are cash in hand. Unrealized gains are just that – unrealized.
  • Investment advisors are not going to be any better with your money than you are. If for some reason you find a multimillionaire advisor who is willing to take care of your investments for you, fine, but otherwise they are probably getting the same information you are. Don’t assume they spend all of their time studying the market while you’re working at your day job – most of their time is probably spent making cold-calls.
  • If you don’t learn about taxes, you will pay for it dearly for your entire life. And afterwards.
  • Not everyone has the fortitude to prepare their finances for their own death, but people with a wealthy mindset do.
  • Frugality does not mean spending ten hours sewing socks together that could be replaced for $8, or using a blend of toenails, toothpaste and BubbleYum to make homemade glue. Your time must be SPENT wisely.
  • Eating out is a lot of fun, and you pay a premium for that fun. If you ever doubt that, look at the cost of a six-pack of beer versus a single beer at a restaurant. Consider how much the restaurant charges for a side order of french fries, then go see how much potatoes cost per pound. There is a labor cost to shopping for food, preparing it and cleaning up afterward that you avoid when you go out, but it’s not as much as you think.
  • Driving a gas-guzzling car is always a waste of money, no matter how much gas costs. In addition to the fact that you probably paid too much for an overpriced tank that’s designed for offroading and you don’t even like getting your shoes muddy, you are helping to destroy the earth’s environment by contributing to climate change. One way or another, climate change is going to be expensive.
  • If you get married, make sure you are on the same page about money, lifestyles and children before you get married. Why? Reason #1: If you have the same goals, you have a better likelihood of achieving them.  Oh, and reason #11 above.

And a final bonus thought: it’s not easy, but it’s doable – there’s room enough for all of us at the table.

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photo credit: *L*u*z*a*
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