Wednesday, January 23, 2013

You Gotta Be Hungry!

Today there are two questions concerning subjects I cover in the blog that really bother me. I am not satisfied with the answers I have. I want better answers. One of these questions is, “Why do some people take action to do what they know to do in order to solve a problem they know they have when others do not?” The basic truths of personal finance are not rocket science. They are taught in different cultural and philosophical matrices by different teachers coming from different backgrounds and life experiences but they are all remarkably similar.

Spend less money than you make.
Get out of debt!!!
Save the difference between what you earn and what you spend.
When you have sufficient funds, begin to invest.
When you have sufficient investments, live your dreams!

Different teachers put different spins on these steps. They recommend slight variations in the order and particulars of each step, but that is all there is to achieving financial freedom. This stuff works. It works so well most people wouldn’t believe you if you told them just how well it works.

I think the beginning of the virtuous circle that leads to wealth occurs when desperation meets truth. For some reason some situation in your life becomes so unacceptable that you will take an uncomfortable frightening step to escape that pain.

As far as I can determine, this description of the virtuous circle came from Tony Robbins, but it is pretty common across the Internet.

At some point you become so desperate you will do something that will trigger a change in your life. If you do a good thing, like spend less than you make. You will get a good result, like paying a credit card down to zero. These results will increase your belief in the efficacy of virtuous action. This belief will lead to an experience based understanding of the potential inherent in these simple truths and in your self. The potential found in these teachings will then be further manifested as you continue to take the appropriate action.

Here is the problem. People are getting some immediate benefit out of their bad actions. If a smoker decides to spend $5.00 on a pack of cigarettes rather than seeing that money as an opportunity to escape debt, he receives a brief but immediate jolt of nicotine and the satisfaction of a ritual he finds comforting. If you begin to follow the simple truths of personal finance that will lead to financial freedom, you won’t see much difference tomorrow except the absence of nicotine in your body and the absence of a smoking break in your busy work schedule.

However, over the course of 30 years at 6.5% interest, an achievable number, your pack of cigarettes will become $165, 961. You will also still be alive and healthy enough to enjoy than money.

If you are not hungry enough to change your life, find other people who are that hungry. Then find people who know more than you know and care enough to spend time to teach you what they know. Don’t be afraid to pay them for their time. Dave Ramsey’s Financial Peace University, a course I teach at our church, will cost you about $100 for materials. Like our friend the smoker, begin to establish rituals that will provide the feedback that will drive the virtuous circle. An example: On the first day of each month calculate your net worth. As the months pass, you will watch your net worth turn positive and start to climb as your debts drop to zero. Then one day you will look around and realize you are free.

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