Laws of Success
As Seen On
Now here is a secret you almost know. I say "almost" because it will sound familiar, yet is somewhat different from the version that has been going around for the last few centuries. It seems that every father feels obligated to tell his children to "live within your means". Pretty good advice, on the surface. But there are two tiny little problems with that advice. If you live within your means, human nature being what it is, that's just like saying, "Spend every dollar you make, and don't spend those you ain't made yet". And those are the problems. If you spend every buck, there's nothing left to invest. And if you don't spend money you haven't earned yet (use credit), you cannot maximize your earnings, and grow more wealth. Therefore, the way this secret should be worded is "live below your means, and if you use credit, use it wisely for things that appreciate in value."
Money is not stagnant - it is always moving. Even when you put it in the bank, it moves as the bank invests it so they can pay you interest. Therefore, if you aren't growing it, you're blowing it. Plain and simple.
Living below your means does not mean you must live in poverty. It simply means that you choose to not spend every dollar you make. It also means that you will use your intelligence, imagination and logic to find alternate ways of accomplishing things, at less cost. Instead of spending $30 taking the clan out to a movie with popcorn, spend $3 to rent a video and buy a box of Orville Redenbacher popcorn. You'll find the seating at home to be more comfortable, the movie entertaining, and the popcorn won't taste like buttered cardboard. You save money on the movies, money on gas, and you save time. Even once a month, this saves roughly $300 per year.
Living below your means (aka living wisely) means that instead of spending $3000 on a ski-mobile that you will use maybe four or five times each year, you would rent a ski-mobile for those times. You save thousands of dollars, and you won't need to house it, fix it, gas it up, pay for registration or pay the taxes on it.
Time enough to own one after your future is secured and you need to find ways to get rid of some of your money. And even when you do buy one, you will have learned how to deduct it from your taxes (you'll learn stuff like this later).
Old man Walton, who founded Wal-Mart and Sam's Club was noted for driving a '52 Chevy pickup truck. Rumor has it he could easily have afforded a few Rolls Royce autos, whereas he was the richest man in America.
When you see people driving a Mercedes and wearing a Rolex watch, you say, "Wow! He must have money." When I see someone driving a Mercedes and wearing a Rolex watch, I say, "Wow! He must have had money, but he has a lot less now." Such things are status items, and status items are always prohibitively expensive, and are designed to separate a person from their wealth. I know a lot of people who want others to think they are rich (but they aren't - they are merely well off) who surround themselves with expensive status symbols. I also know some truly wealthy people, and by and large you would never know they are wealthy by looking at them. They drive a Chevy or a Ford, live in nice, yet modest homes and dress casually. And they live this way for some very good reasons - reasons that those other spendthrift fools just don't understand.
Reason #1: By living modestly yet comfortably, they save more money, which is then invested to make them even wealthier. They would rather have wealth than a Mercedes. Consider: two people, each has $500,000. One buys a Mercedes for $60,000, the other buys a Ford Escort for $10,000. Each invests the balance of their money at 10%. In ten years, the guy who bought the Escort will be $100,000 richer than the guy who bought the Mercedes. If the Mercedes guy also buys a $300,000 home, a Rolex watch and Italian shoes, while the Escort guy buys a $200,000 ranch, a Timex watch and gets his shoes at PayLess, the Escort guy will be more than two times wealthier than the Mercedes guy in ten years. While the Mercedes guy is spending, the Escort guy is investing. You cannot earn wealth from money you spend.
Reason #2: When people see that you have money because you drive a Mercedes or wear a Rolex, you become a target. Every sales person in the country will be approaching you and trying to sell you something. They can see that status is important to you, and if they have status items, they know you are an easy mark. Worse, unscrupulous people may file nuisance suits, just so you will settle, because it's cheaper to settle than to fight them.
Reason #3: The truly wealthy, if they are wise, have learned that the best things in life have little to do with money. In fact, money can actually get in the way of good friendships and community camaraderie. While people may respect your wealth, they may be a bit put off by it. They may assume that, being wealthy, you are also stand-offish when it comes to the "little people". It's kind of like being the prettiest girl in school - you are so pretty that all the guys think they don't have a chance, so no one asks you out except for those dumb jocks who think they are God's gift to women.
Reason #4: When everyone knows you are wealthy, you can never be certain of a person's motives when they befriend you. Are they really a nice person, or are they just trying to get closer to your money? I know a man who had been quite successful, financially, and all of his romantic adventures went sour. It seems every girl he met was more interested in his bucks than in him. Lonely and hurt, he decided to live and act like he was poor, but struggling to do better. Then when a gal showed interest, he knew it wasn't because of money. He married one of those gals, and has been happily married every since. I know, because I am that happily married man :o)
Secret #8 Summary: The point, of course, is that your financial situation is best kept secret to some degree. Keep 'em guessing. By doing so, you become wealthier, and happier. Live below your means, but not to the point where you are giving up too much. Enjoy dessert, but remember that dessert doesn't have to be extravagant.
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