Tuesday, September 10, 2013
A Little Introduction
As I have studied personal finance literature it dawned on me that every unhappy story about money had one thing in common, denial. People get themselves into very serious trouble one step at a time. When the experts pointed out what is obvious in these examples, the victims continued to deny the reality of their situation. It wasn’t really a guilty defensive of their behavior, it was denial. If we are unable to confront the simple facts of our condition, it is a certainty things will not get any better. Can you, can I, be comfortable with the reality of a situation? Start right now. Look at the following equation. Money In = Money Stored + Money Out Pretty simple isn’t it? This equation integrated over a lifetime is all the mathematics there are to the story of your money. Most of our money in will be in the form of our take home salary, but there are other sources, interest, dividends, gifts, inheritances, and pensions. Money stored includes both cash in bank accounts, credit unions, and money market funds and investments. Investments include the equity in your home, stocks, bonds, gold doubloons, and your collection of autographed footballs. Money stored can grow over time or it can suddenly shrink as happens in stock market crashes. Money out is the sum of the real money you spend every month. Watch this equation with unblinking eyes. As long as money in exceeds money out, there is nothing to worry about, money, properly stored, will increase over any sufficiently long period of time. If money out, for whatever reason, exceeds money in, it is important to examine the facts with unblinking eyes. If you are looking for easy answers, you will not find them here. If you are looking for someone who will tell you how to live your life, it won’t be me. Your abilities, your life are a unique gift from God. Your financial situation is the sum and total of how you have applied these gifts to the particular situation of your life. If you want to change your life, you will need to make the commitment; you will need to make the decisions; you will need to find your own path. I can present time proven principles that have helped others find financial freedom. How you choose to apply them in your own life is your personal responsibility. One person may choose to work overtime or take a part time job to increase the left hand side of the money equation. Another may change jobs from one that pays a predictable hourly rate to a job in sales or even starting their own small business, jobs that are totally dependent on their skills and efforts. A third may go to night school for five years while working full time and caring for a family in order to earn a degree in financially lucrative field. Another person may focus almost entirely on stretching every dollar as far as possible. Learning to artfully lead a simple life can be a blessing in itself. I have seen people who have learned how to grow and process much of their own food, producing better health at a lower cost than can be achieved in a supermarket. They are also severing the chains that hold them in bondage to world’s financial system. Some choose to focus on managing the money they have in storage. They constantly monitor there investments, learning to move money with the ebb and flow of the markets. They study different opinions and methods, especially the methods of the money masters. While not many will become billionaires, 40 years of consistent effort in this area coupled with a reasonable rate of savings is very likely to lift a household net worth past $1,000,000.