Thursday, July 2, 2015

There Are No Secrets!

I have had trouble coming up with a topic for my next blog post. After writing over 700 posts, it is hard to come up with anything that is entirely novel. I thought about writing a post on the Greek and Puerto Rican defaults. How can a personal finance blog author go wrong excoriating debt, whether public or private? I may change my mind if these situations heat up, but today foreign sovereign debt seems a bit too far off topic. However, my ruminations did lead me to this subject.

People believe that managing money is a big secret known only to those who have money to manage. More than once I have wanted to scream, “There are no secrets.” In the pages of this blog, I have shared everything I know. That was enough to help get me to a more than comfortable retirement.

I tried to remember where I had first heard the phrase, “There are no secrets.” I thought it had something to do with the martial arts or meditation. It turns out that it comes from a book title, “There Are No Secrets: Professor Cheng Man Ch'ing and His T'ai Chi Chuan.” I can’t remember if I read this back in the days when I practiced T’ai Chi as a martial art. However, that is where I first heard the phrase. It certainly is appropriate. Martial arts students firmly believe that their teacher is withholding secrets from them that would allow them instantly to become stone cold killing machines without any effort or practice.

One of the reviewers on Amazon observed, “Master Cheng Man-Ch'ing once said there are three ingredients for progress in the study of tai-chi: natural talent, perseverance and correct teaching. Natural talent is the least important. A gifted student has certain obvious advantages, but the untalented need only work hard and it will come.”


There are no secrets, but financial freedom requires a lot of hard work. When we were first married, I had $900 in the bank, a car worth less than the $600 I paid for it a couple of years earlier, and a stereo worth roughly the same as my car. Ten years later, we had maybe $2,000 or a little less in the bank and a car worth about the same as my bank account. At that point we did have a combined total of four college degrees without any debt, so we were better off than many 34 year old couples living in today’s world.

Stay out of debt unless absolutely necessary (four exceptions)

a) Just about no one can pay cash for a house
b) Medical bills come whether you have money or not
c) Borrowing for school is potentially dangerous. Even in a field with high pay and the near certainty of employment, be careful. Scholarships and work study grants are better.
d)Starting a new business or expanding an existing business. Keep that cash flow positive.

Don’t use a Credit Card unless you can pay it off every month.

I have started reading still another personal finance text. This one is titled “Help! I Can’t Pay My Bills,” by Sally Herigstad, CPA. I have read about one third of the book. It looks pretty good, but there are no new secrets to reveal. The author assumes the reader is being hounded by collection agencies while teetering on the verge of bankruptcy, a course of action that she generally considers a bad idea. She then recommends that the reader calculate their net worth. Then make a formal zero based--to the penny--monthly budget. No excuses! If you don’t have enough money to budget, you absolutely need a budget. If your income is irregular, you absolutely need to budget. Then set out to build an emergency fund by selling your stuff or taking a second job. Like all good authors she has an idea or two you are not likely to see elsewhere. She recommends turning into a one of those evil heartless bill collectors. Go after family members or friends who owe you money, especially that ex-spouse who is behind on his child support payments. She also recommends that people with financial problems get rid of their pets. I have only heard that from one other author, delivered in the form of a joke about his marriage.

OK. You have an emergency fund. Now start paying down those debts. My personal favorite is the debt avalanche. Pay off your debts as rapidly as possible. Pay off the debt with the highest interest rate first and the debt with the lowest interest rate last. If you prefer the debt snowball that starts with the smallest debt and works to the highest debt last, that is an excellent, psychologically sound approach.

Once you have your debts headed in the right direction, start saving for retirement and other large purchases. Again, there are no secrets. You don’t need to be the next Warren Buffet to find your way to financial freedom. If you have money deducted from your paycheck before you see it, a small amount invested every month in a boring unimaginative portfolio of stocks and bonds will build into an impressive total over the course of a 40 year career, even you never receive a particularly large income. Small consistent investments, plus time, multiplied by the miracle of compound interest produces amazing results. If you don’t want to learn anything about investments, all you need to know is three little words, Vanguard Lifecycle Funds. Vanguard is no longer the only low cost player out there, but it is still worth your time to check out their offering before making a decision.

Give something to God without expectation of return. It is good for your heart.

That’s pretty much all there is to it. Now just remember what Bruce Lee had to say about practice, "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."

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