• Boring conversations at dinner parties or on dates
• Being considered a cheapskate by your spouse and friends
• Bouts of insomnia, while thinking of ways to save money
• Funky smell from that homemade soap or deodorant
• Missing invitations to events where they split the bill

Stepping Off the Frugal Path

Many of the posts from Personal Finance bloggers are about climbing out of debt, strict budgeting and living a frugal existence.   This appeals to a very small percentage of the population, most of whom are PF bloggers.  I’m taking a stand against this.  I’m calling B.S. on the lifestyle police and giving frugalistas the finger.

I don’t want to clip coupons or shop in thrift stores.  And, I don’t want to have to count my dimes or create a monthly budget.  I don’t want to dwell on my bills or my expenses.  Most of all, I don’t want you to waste your time on this either.

I have a much better plan.  I want my finances to be fun.  I want to check my investments and dream of where they will be in twenty years.  I want to see my income steadily rising.  I want a bigger budget for fun and entertainment.  I want to invest more of my income and pay less in interest.  I want to enjoy the money I have worked so hard to earn.  Most of all, I want you to have this lifestyle too.

Why Being Frugal Doesn’t Always Pay

I understand there are people of limited means who must be frugal in order to survive financially.  Twenty years ago, I was one of them and I knew every frugal trick in the book.  The reason I wrote this post is because I spent years of my life scraping by just to make ends meet.  I firmly believed I was doing the right thing at the time by limiting my expenses and I was very proud of my frugal accomplishments.  But, now I know I was definitely on the wrong track.

I should have been working much harder to increase my income.  Instead, I was expending most of my energy working long hours for low wages.  And, I was squandering my mental talents on creative ways to save on every expense.  This approach cost me a lot of time and money during my 20s and 30s.  I still live a pretty frugal lifestyle for my tax bracket, which allows me to invest 20% of my net pay.  But, I am way happier now that I have sufficient income to enjoy my life.  My family is much happier as well.

Reasons to Increase Your Income Instead

Savings are finite, while income is virtually unlimited.

It’s not possible to cut 100% of your expenses, unless you mooch off others or live in a homeless shelter.  It would be difficult for most people to even cut 10% of their expenses.  But, it’s very possible to raise your income by 10%, 100% or even more.  In fact, I have more than quadrupled my income in the past twenty years.  And, I don’t work any harder than I used to.  I just get paid a lot more for my efforts.  In a way I am very lucky.  But, I made a conscious effort to boost my salary and it worked.  I wish I had thought of it sooner.

There are economies of scale with a bigger income.

You will pay higher taxes, but your budget allotments will increase as well.  For example, I always pay myself first by putting away a percentage of my net income.  Obviously, the amount of money I was able to save grew a lot as my income increased.  So did my allotments for food, clothing, travel, transportation and entertainment.  As the pie gets bigger, so do the slices.

Many of your biggest monthly costs are fixed.

Unless you inflate your lifestyle, your fixed expenses will become a smaller percentage of your income.  For example, my mortgage payment is the same as it was 13 years ago (actually it went down), while my income has more than doubled.  This allows me to comfortably pay extra each month on the loan.  Insurance, property taxes, utilities and other fixed costs are also much more affordable on a higher income.

Savings are incremental, while raises are exponential.

Would you rather get a 5% raise or save 5% in expenses?  After taxes, it may seem like the 5% savings is a better deal.  But, your income will be up 5% every year and this could add up to a lot of money over time.  When you get your next raise, it compounds on top of the old one.  So, regular increases in income tend to grow exponentially, just like investments.

The Bottom Line

The bottom line is that you must keep a lid on your spending. But, this doesn’t mean you should become preoccupied with being frugal. It is much more efficient and enjoyable to use that energy to increase your income. As your income rises, it’s OK to increase your spending, as long as you eliminate debt, avoid payments and save for your future.

• Spend some of your spare time increasing your income.
• Pay off any consumer debt or loans as quickly as possible.
• Don’t buy anything you don’t need or can’t afford.
• Don’t spend a lot of money on depreciating assets, like cars.
• Pay your bills promptly and in the most efficient manner.

Saving & Investing

• Invest at least 10% of your net, before you pay anyone else.
• Buy your own home as soon as you can comfortably afford it.
• Study all types of investments, even the ones you don’t own.
• Never invest in anything you don’t understand completely.
• Properly diversify your investments, including real assets.
• Never give up control of your accounts, even to an advisor.

Life & Finances

• Have written financial goals and review them regularly.
• Make sure you are fully insured and protected from loss.
• Create a will and instructions for those you leave behind.
• High savings and low debt can mitigate a financial crisis.
• Sound finances can greatly reduce the stress in your life.
• After you save 10% and pay your bills, enjoy your money.
• People are the reason for money, not the other way around.

What most people don’t realize is that you don’t have to be wealthy or even high income in order to live large.  Since we all deserve to live large, here are a couple of tips that I use to live large on a modest income.

Step One – Keep it Real

The first lesson of living large is to stop desiring what you can’t afford.  Why dream of luxury cars and mansions, when you’re bringing home a blue-collar paycheck?  Why covet clothing, jewelry, cars and flat-screen TVs when you are up to your eyeballs in debt?  This doesn’t bring about happiness.  It brings about feelings of inadequacy, jealousy and discontent.  If you wish to dream of a better life, start by dreaming up a plan to increase your income.  Nothing is more deflating to a soul than idle dreams and empty promises.

Materialism is a curse that was created to enrich others at our expense.  All of the advertising we see is designed for one purpose, to separate us from our money.  Advertised items are presented with a highly inflated value.  And, the advertised benefits are dubious at best.  Seriously, how many times have you hooked up because of your deodorant?  You rarely need something you see in an advertisement, which is why these companies are paying to reach you.  The sooner you recognize this scam, the happier your life will become.

Thou shalt not covet thy neighbor’s goods. – 10th Commandment

Step Two – Enjoy what you Have

The second lesson of living large is to enjoy what you have.  Appreciate your health, your talent, your family and your friends.  These are the most valuable things you posses, because they cannot be purchased for any amount of money.  Treat each day as a gift and you will have a wonderful life.  Treat your finances as sacred and your income will become a blessing.

Relish the opportunities that are available to you.  You are living in the most prosperous time that has ever existed throughout history.  And, you may be living in the richest country on the face of the planet.  You are fortunate to be alive right now.  You weren’t born a slave or a servant, so don’t act like one.  Seize your opportunities and become the person you dream of being.

Blessed is he who expects nothing, for he shall never be disappointed. – Benjamin Franklin

Step Three – Reward Yourself

Wednesday, I watched an Angel’s game with my brother, daughter and niece.  As I was sitting in the stands watching the Angels beat up on the Rockies, a pleasant thought occured to me.  I am so thankful that I can finally afford many of the fun things I like to do.  Ten years ago, there’s no way I could have afforded my share of the season tickets.  That money would have gone to pay the bills, with nothing left over for me.  Now, I can afford a little entertainment and I treat myself and my family.  This has made our lives so much more enjoyable.  Rewards don’t have to be expensive in order to be valuable.

All of those years when I struggled to make ends meet, it never occurred to me that I just needed to earn more money.  It never dawned on me that I deserved a bigger reward for all of my hard work.  I used to be proud of the fact that I had worked for almost a decade without taking a two-week vacation.  Now, I realize that a decade of my life passed me by, while I was slaving away to make someone else rich.  Of all the foolish things I have done to myself, this has to be one of the worst.  Don’t let a year go by without doing something special for yourself.  If you work hard, then you deserve it.

Pay yourself first and then reward yourself second.

Step Four – Plan for the Future

The final lesson of living large is that it doesn’t matter where you are today; it matters where you are going.  Back when I was pushing a lawnmower for my brother’s landscaping company, I knew some day I would become a professional.  Others warned me not to quit my job, but I had bigger goals in mind.  There were years of college, a couple of layoffs and some lousy jobs along the way.  But, I have accomplished my career goals and have a bright future.  Wonderful things are possible, if you are willing to do what it takes to get there.

I had a similar experience with my finances.  I started out with a very low income and I could barely save for my future and feed my family at the same time.  But, after many years of hard work and savings, my income and investments rose steadily.   Even after the stock market collapse and tech bubble-burst, I have a bright financial future.

Don’t neglect your finances or you will limit your future.

The Bottom Line

The bottom line is that living large is easy, even on a modest income.  All it takes is a dedicated effort, a solid plan and perseverance.  Most important, it takes a wealthy mindset.  Once you believe that you deserve to live large, the path to get there will become very clear.

William Feather – American Author

The show contained a series of skits that highlighted responsible personal finance and the wise management of money.  The show was created to be humorous and educational.  The humor seemed to fade in and out, but the show was definitely educational.

What was Covered

Most personal finance topics were covered, including mortgages, debt, emergency funds and retirement planning.  The content was very basic and designed for people who were unfamiliar with finance.  The general theme was to live below your means and prepare yourself for a secure future.

My favorite part was the spoof of Cribs, where Seth Green is bragging about his 2-bedroom house that he can afford on a third of his income.  The comment that he slept like a baby was priceless.  I also enjoyed the skit by Samuel L. Jackson called “I’m Broke as Hell”, where he portrays a personal finance guru, who has no money.

I applaud Mellody Hobson and all of the artists for their contributions on this project.  This show is truly something to be proud of.

Why this Show Matters

This is the first prime-time special dedicated to responsible personal finance that I have seen on television.   There are plenty of financial guru shows, such as Suzy, Dave and Robert.  But, these shows are practically infomercials for their products.  Un-Broke was reminiscent of a public service announcement, like the singing cartoons of the ’70s.

Personal finance is quietly becoming a mainstream issue in America.  Like the environment, people are starting to question the sustainability of our debt and consumption lifestyle.  As the layoffs, bankruptcies and foreclosures take their toll on our economy, some consumers are starting to realize there is a much better way to live.

After the Great Depression, an entire generation of Americans became frugal for the rest of their lives.  And, their baby-boomer kids learned this lesson from their parents and were fiscally conservative.  Hopefully, this recession will help America get back to financial reality for the benefit of our future generations.

The Bottom Line

The bottom line is that it’s great to see “Money 101″ featured on prime time television. It’s about time Hollywood accepted responsibility for promoting their over-the-top lifestyles.  Advertising and consumption have always profited the media circus at our expense.  A little financial payback is long overdue.

Don’t be a hamster on a debt-treadmill just to enrich others.

So, without further delay, here is the plan:

The 10-20-70 Plan

1. Save 10% of your Net Pay
2. Pay 20% of your Net to Debt
3. Spend 70% to Live Joyously

Why the 10-20-70 Plan Works

There are a number of reasons why this simple plan works so well.  The most important reasons are that it is balanced and sustainable.  There is no shortcut or magic to debt reduction.  Any permanent solution requires lifestyle changes that keep you spending less than you earn.  Having a sound repayment plan is a great start.  But, then you need to remain debt-free forever.  The best way to accomplish this is to have enough spending money to live comfortably.

It is well known and documented that people who discharge or refinance their debt have a greater than 80% chance of being back in debt within a short period of time.  The banks call this “reloading” and they have it factored into their risk models.  So, if you think you can shed or shuffle your debt, you will only be treating the symptom and not the cause of your problem.  Instead, you need to break the spending habits that caused your debt in the first place.

Where the Plan Came From

This plan came from my favorite little book, The Richest Man in Babylon.  In the book, a number of characters were in desperate trouble with debt and they were helped tremendously by this plan.  My personal experience is that it definitely works, although I’m much better at saving than debt reduction.

I use a modified version of this plan that is 20-20-60.  I’m very fortunate to be making good money right now and I am taking advantage of the low market prices to invest more.  The living joyously part is my own addition.  After a little practice, it’s quite easy for most people to live on 70% of their income.  And, the best part of this plan is not having to squeeze pennies to reduce debt.  You can and should have fun while you are working yourself out of debt.

Saving while you’re in Debt

The 10% savings is the most controversial part of this plan.  Many people believe the debt should take precedence over savings because the debt usually has a higher interest rate.  Although this may seem to make sense mathematically, it never makes sense to pay everyone but yourself.  Being broke is always a bad financial plan.  If you aren’t saving, you aren’t accumulating wealth.

That’s why Saving 10% is the number one item on the list.  Pay Yourself First, before anyone else gets their money.  Some people call it an emergency fund.  I call it my wealth fund.  Either way, it always makes sense to have some money put away.  Savings and debt reduction are separate goals that must both be accomplished.  So, don’t neglect one for the other.

Special Circumstances

Everyone’s financial circumstances are different.  If you have little or no income, this plan isn’t going to help you.  Your plan should be to generate more income.  If you have extreme debt that cannot be reduced with 20% of your income, you may need to seek help from professionals.  If you can’t live on 70% of your income, you may need to make some lifestyle changes.  For example, you may need to sell a car or move to a cheaper housing.

The Bottom Line

The bottom line is that debt is very hard to pay off.  But, it’s a pretty simple matter to take control of your debt.  You just need a plan and a commitment to eliminating debt from your life.  Otherwise, you may remain in debt forever.

“Debt is the slavery of the free.”

Publilius Syrus – Roman Author

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Happy Mother’s Day

First, I would like to wish every Mom a Happy Mother’s Day and I hope your day is truly special.  Moms have the most important job in the world and they deserve some recognition for everything they do.

Our Mother’s Day Tradition

Mom doesn’t allow gifts on Mother’s Day.  She only wants her children and grandchildren to be at her house for dinner.  So, I will show up on Sunday with my card, my family and a big hug.  My brothers and sisters will all be there and the kids will hang out together.  I’ve never missed a Mother’s Day in my life.

In the Beginning

When my parents were still together, Mom took care of the finances.  She was magical in her ability to make ends meet.  She could feed a family of seven with a single chicken and a couple of potatoes.  My parents sent five kids to Catholic school and supported us on a single income.  It still amazes me to this day.

Mom went to work after we were bigger and she worked at Sears for seven years.  But, it was her second job at First Trust Bank, where she really started to hone her financial skills.  Although the pay was low, the experience was invaluable to her.  I can still remember the glimmer in her eyes when we talked about investments.

The Middle Ages

After my parents divorced things got tougher.  Mom had to keep the whole house running by herself.  Dad’s child support helped a lot, but the weight of responsibility fell squarely on Mom.  She never buckled under this pressure.  She always had that confident smile that let us know everything would work out.

Mom took care of the house, raised five kids, worked a full time job and went to night school.  After 11 years of college, she graduated with honors with a business degree.  The jobs that were available to her at the time were mostly secretarial.  So, she started her own tax and bookkeeping business, which she sold when she retired.

The Later Years

Mom finally started to pull ahead financially after we all started moving out.  Without the drain of kids on her finances, she was able to take better care of herself.  She paid off her house and then acquired a rental property, which provides income in her retirement.  She lives a comfortable life with her husband and they travel a lot.

Despite earning a modest income for her entire working life, she accomplished so much through sound financial planning.  And she has shared generously with others in so many ways.  She started college funds for her grandchildren and gives them each a savings bond every Christmas.  She sends them a quarterly statement, to encourage them to save and invest.  Her example has put us all on a similar path.

What I Learned about Finances from my Mom

• No matter how much you make, you should always save some.
• Spend the time to choose good investments and it will pay off.
• Real estate can be a great investment, when purchased wisely.
• A college education is an investment in your future income.
• Starting a business can put you in control of your own career.
• Teaching your kids about finances is your duty as a parent.

What I Learned about Life from my Mom

• Hard work always pays off, but it often takes time.
• The best way to influence others is to lead by example.
• Strength is a silent quality that shows in your actions.
• Wisdom comes from experience and you never stop learning.
• Compassion for others is a gift that will return to you.

The Bottom Line

There is no amount of money that could repay the debt of gratitude that I owe to my Mom.  I’m certain she feels a great reward just to see me becoming successful on my own.  Yet, I feel compelled to share the wisdom I received from her.  So, you are now the beneficiary of my mother’s wealth of experience.

Abraham Lincoln – 16th President of the United States

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Related Posts

Credit is the Root of All Evil
Cardholders Bill of Rights Act

Pending Legislation

President Obama, Congress and the Treasury Department are slowly starting to shut down the deceptive practices of credit card companies.  Each has a slightly different plan in mind, but all three provide comprehensive protections.

Credit Cardholder’s Bill of Rights Act

I have been following this bill (H.R. 5244) for well over a year now.  It’s sad that it’s taken so long for this bill to come to the floor.  The banking lobby is very powerful and has done everything in their power to kill this bill.  Amazingly, it has finally passed committee and may start debate on the floor as soon as today.  The Senate is considering a similar bill, which makes it likely this will pass in some form.

The main components of this bill are:

• Protects cardholders against arbitrary interest rate increases
• Prevents cardholders who pay on time from being unfairly penalized
• Protects cardholders from due date gimmicks
• Shields cardholders from misleading terms
• Empowers cardholders to set limits on their credit
• Requires card companies to fairly credit and allocate payments 
• Prohibits card companies from imposing excessive fees on cardholders
• Prevents companies from giving credit cards to people who can’t afford them
• Requires Congress to provide better oversight of the credit card industry

President Obama’s Plan

President Obama made campaign promises of credit card protections and now he is following through.  Last week, he summoned representatives of the major credit card issuers to Washington.  He discussed “strong and reliable protections for consumers” and provided some core principles for reform.

Reforms outlined in President Obama’s plan include:

• Banning unfair interest rate increases
• Forbiding abusive fees and penalties
• Ending late-fee traps
• Forms and statements must be printed in plain language
• No more fine print or confusing terms and conditions
• Contract terms must be accessible for comparison shopping
• Require every issuer to have a plain vanilla, simple terms credit card
• The Government will have more effective oversight and enforcement

The Treasury Department Plan

The Office of Thrift Supervision enacted the first legislation for credit card reforms and it was similar to the Bill of Rights Act.  Unfortunately, the OTS gave banks until July of 2010 to comply.  Banks responded promptly by raising fees and interest rates.  Either they felt they could circumvent the reforms or they considered it a license to steal for another 18 months.

In the past, banks may have gotten away with such an arrogant response.  But, in the current economic climate, they may have caused a backlash that brought about the reforms by Congress and the President.  Either way, I applaud the reforms taking place and I’m hopeful consumers won’t be exploited for another year.

Doing what’s Right

Many people believe irresponsible consumers are solely to blame for their own credit card problems.  I’m not one of them.  Although consumers have been irresponsible with credit, that’s no excuse for banks to cheat them.  And, it’s no excuse for the Government to allow them to be preyed upon.  In my opinion, this is an example of kicking people while they’re down.  It’s disgraceful and it never should have happened. 

The best way to keep consumers responsible is to not extend credit they can’t afford to pay back.

Besides, these deceptive practices also harm consumers who are responsible with their credit.  Delayed billing, shifting due dates and 10:00 AM cut-offs create late fees even for those who pay their bills on time.  One of my credit card companies was sued for delayed processing of their mail just to create more late fees.  This type of fraud generates millions of dollars for banks and goes unpunished.

The Bottom Line

Credit card companies have been allowed to use deceptive practices on consumers for far too long.  Reform is way overdue and definitely welcome.  One thing is crystal clear to me.  Irresponsible banks are the primary cause of the financial crisis.

Consumers have also been irresponsible.  Their excessive borrowing was encouraged by banks to generate higher profits.  Now that it has backfired on everyone, consumers are paying a heavy price, while banks are receiving a bailout.

It’s time for banks to become accountable for their actions.

“We can loan you enough money to get you completely out of debt.”

Recommended Reading

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Taxed Enough Already  (TEA)

The Taxed Enough Already (TEA) Party, which takes its inspiration from the Boston Tea Party, is growing in strength and numbers.  They are holding rallies across the nation and members are writing their elected representatives.  Vocal crowds turned out in many cities on tax day and there are hundreds of rallies scheduled for the 4th of July.

It will be interesting to see how much of an impact the TEA Party will make.  There is no doubt many voters are fed up with the runaway spending and the climate is ripe for a change.  The real question is can the TEA Party generate enough momentum to affect the decisions made by our Government.  I certainly hope so.

Our Future as a Country

Many believe our very future as a country is at stake, at least in the lifestyle we have grown accustomed to.  Unless we want to have an economy like Japan’s, we need to stop spending our country into ruin.  Our current level of debt is so high that investors are dumping our bonds and currency.  Investors already know what most Americans haven’t yet figured out.  There is no possible way for our Government to repay the 11 Trillion dollars of debt without sustained inflation or a massive devaluation of the dollar.

If that happens, Government bonds and U.S. dollars will be worth a lot less.  And, so will everyone’s IRA and 401K accounts.  Think about that for a second.  Say you work hard your whole life to save up a couple million dollars and then it gets devalued or ravaged by inflation right before you retire.  I don’t want to engage in scare-mongering.  But, this is a very realistic scenario.  It has happened in Germany, Mexico, Argentina and many African and Asian countries.  Our economy cannot support 1.5 Trillion dollar annual deficits.

Graft and Corruption

The most frustrating part of this whole deficit problem is that it stinks of graft and corruption.  Between the Wall Street bailouts, the targeted earmarks and the no-bid contracts, it is obvious that our tax dollars are being funneled to companies who are connected to our politicians.  These entities are stealing our precious tax dollars, which should be used for providing Government services.

Lack of Representation

The Wall Street bailouts showed very clearly that the Government no longer represents voters, but special interests.  Voters were strongly against the bailouts, but were largely ignored by the Government.  Only a handful of politicians stood up for taxpayers and they only held up the giveaway for a short time.

The next election will determine a lot about our representation within the Government.  If we vote out a significant number of incumbents, then we may regain some influence as voters.  If the majority of incumbents are re-elected, then we may continue to lose our rights and our representation.

The Bottom Line

The bottom line is that taxes are necessary to operate our country.  And, I don’t mind paying my fair share.  However, I am furious that our hard-earned tax dollars are being squandered recklessly and swindled away from our treasury.

I’m both a patriot and an optimist.  But, I don’t foresee a very pleasant future if we can’t stop this runaway spending.  Unless we can regain some control over our Government, we are all going to be sitting together in a sinking ship.

Ronald Reagan – 40th President of the United States

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When Good Luck Strikes

Last month, I had one of the luckiest days of my entire career.  I received a big raise, a promotion and they doubled my stock options.  This was totally out of the blue and completely unexpected.  I wasn’t even due a review for another couple of months.  At a time when so many others have been laid-off and are hurting, I caught a huge break.  I felt like the luckiest man alive.

It started me thinking about what I had done to deserve all of this.  I had worked hard and completed all of my projects, but that didn’t seem to be the cause.  According to the feedback, the primary reason was my willingness to pitch in and help.  Management appreciated my positive attitude and rewarded me for it.

When Bad Luck Strikes

My son had the extreme misfortune of having his truck towed away twice last month.  This cost him over $400 that he had to borrow, in order to bail out his truck.  I could tell from his attitude that he felt unlucky about this happening to him.  I’m not so sure that he understands how his own actions have contributed to his problems.  In other words, if he wasn’t out late at night carousing with his friends, his truck was not likely to get towed away.

I remember being 20 years old and thinking I was very unlucky to be getting a lot of speeding tickets.  Everyone kept telling me to slow down, but I wouldn’t listen.  Instead, I kept thinking that I was driving in the wrong lane or that having a red car was the cause of my problem.  It wasn’t until I lost my license and had to walk for six months that I realized I was causing my own bad luck.

How Luck Affects your Finances

It’s not so much how luck affects your finances, as the perception of luck.  For example, if I had realized when I was young that I was driving too fast instead of being unlucky, I could have saved myself thousands of dollars in traffic fines and insurance costs.  That would have definitely improved my luck and my finances.

Another example of the perception of luck is the “wealth effect”.  This is when people feel wealthy because the stock market or home values are up.  People tend to spend more money when experiencing the wealth effect, even though they may not have any disposable income.  I believe the wealth effect caused a lot of problems for people in this recession.  And, they aren’t feeling very lucky right now.

Making your Own Luck

One of my favorite sayings is that “Luck Favors the Prepared”.  My first experience with this concept was in buying my house.  At the time, I remember thinking I am so lucky to get this house.  The reality was that I was prepared.  I had saved for 10 years and had the down payment in the bank when the opportunity presented itself.  Yes, I got lucky with an incredible deal on my house.  But, if I hadn’t been prepared, my good fortune would have moved on to someone else.

Here is another way to get lucky.  Reflect and analyze the good and bad things that happen around you.  If you know someone experiencing good or bad times, listen to their story and ask yourself what can be learned from it.  Can you avoid their mistake or duplicate their good fortune?  If bad things are happening to you, are you evaluating it objectively?  Or, are you in denial?  Are you blame-shifting the cause to others?  Evaluating your mistakes can be a very painful process.  But, it’s much better than repeating the same mistakes over and over again.

I have recently been very “unlucky” in the stock market, after many years of solid gains.  I tried a riskier investment strategy, which cost me a lot of money.  By recognizing my mistake and adjusting my investment strategy, I hope to improve my luck in the future.  The lesson I learned may become more valuable than the money I lost.

The Bottom Line

The bottom line is that luck happens to everyone.  Whether it’s good or bad luck, your actions can definitely change the outcome.  There are thousands of people who change their circumstances every day.  And, luck has very little to do with it.

A wise person strives to change their luck.
A foolish person employs luck as an excuse.

Thomas Jefferson – Founding Father of America

There is a chapter on the subject of luck in my favorite book, The Richest Man in Babylon.  It’s called Meet the Goddess of Good Luck.  It contains a fun discussion on how you can turn luck to your favor.

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Ignore Social Conditioning

• Money is not the root of all evil.
• Desiring wealth does not make someone greedy.
• Most crime is perpetrated by the impoverished.
• Jobs and opportunities are created by the wealthy.

If you have any negative beliefs about money, it will definitely limit your ability to become wealthy.  You may not even know you have these beliefs.  You may have learned them from your parents, teachers or religious organization.  You must question any negative beliefs before they undermine your opportunities.

In order to become wealthy, you should believe you are deserving of wealth and that wealth will make you a better person.

Eliminate Scarcity Thinking

I have always been a frugal person.  I was raised in a frugal household by a divorced mom and I have lived on a very modest income.  Being frugal served me well in many ways, but it also held me back.  By concentrating on my expenses instead of my income, I cheated my family out of financial resources we could have enjoyed.

I remember early in my career thinking I didn’t want to make too much money, so I could remain marketable.  It was only after many years of working for very low wages that I realized my beliefs were holding me back.  I compared my salary to the average for my position and discovered I was making almost 40% less.  As soon as I accepted my true value in the marketplace, my income rose dramatically.

Never limit the amount of money you deserve.  If you want or need more money, raise the level of service or value you provide.

Develop a Purpose

Most people don’t become wealthy because that is their purpose in life.  Most become wealthy because their purpose is building a business, solving a problem or providing a service.  It takes a lot of passion to become successful and money by itself is a pretty boring motivator.  Wealth is often just a benefit of purpose.

Consider what happens to people who suddenly run into a lot of money.  Most of the time, this is more of a curse than a blessing.  After a brief period of excitement and abundance, they often wind up broke again.  This may happen because they aren’t skilled in the handling of money.  More likely, it happens because their wealth doesn’t serve any purpose.  So, they quickly squander it away. 

Think of all the wealth locked in foundations and the important purposes they support.  Compare your investments to the Gates Foundation, the Getty Trust or the Susan G. Komen fund.  That is the type of purpose your wealth needs to protect it from many whims and pit-falls.  Your family’s future is an important cause.

Wealth without purpose looks a lot like disposable income.

Formulate a Plan

For many years, I dreamed of becoming financially self-sufficient.  I had a sound financial plan and worked very hard to achieve it.  My plan was to save a million dollars, pay off our house and live on the interest.

One day, I realized my plan was flawed.  It left us vulnerable to market crashes, inflation and interest rates.  It also pushed retirement into my late sixties, when I really wanted to retire early.  And, the interest on a million dollars may not generate a comfortable living in 20-30 years.

When I first realized this problem, I became depressed.  I was over 20 years into a financial plan that may not work.  Although this was very stressful at the time, it turned into huge blessing.  By facing the facts honestly, I formulated a new plan that included alternate sources of income.  My new plan is better diversified, less vulnerable, and may allow me to semi-retire in my fifties.

In order to become wealthy, you must have a plan.  Analyze your plan often and objectively to make sure you will reach your goals.

The Bottom Line

The bottom line is that a wealthy mindset is not about accumulating money.  It’s about personal achievement and the realization of your goals and dreams.  It’s about financial freedom and the ability to chart your own future.  It’s about the value of your life’s purpose and the affect you have on the lives of others.

Wealth provides a responsibility, a privilege and a dream.

Garth Brooks – American Country Music Artist

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