My family and I often huddle around our dining room table to have family game night. The game of choice? Cashflow by Robert Kiyosaki. I know a number of you have never heard of the game (in fact I hadn’t either until reading multiple Kiyosaki books), so I’ll give you a brief rundown of the game.
Kiyosaki describes Cashflow as “monopoly on crack.” After playing the game for myself I’d have to say, that’s a pretty accurate description (not for drug use reasons obviously lol). It’s just a really ramped up version of Monopoly. In the game, there are two levels: the “rat race” and the “fast track.”
Each player starts out the game by choosing a dream on the fast track. Kiyosaki says it’s very important to start the game with choosing your dream, because you have to establish your “why” at the outset. Next, each player chooses a game piece and a profession. Each profession comes with a mini financial statement with pertinent information such as income, expenses, assets, and liabilities. No worries, I have no intentions on bogging you down with the details regarding the financial statement.
After each person has their game piece and profession together, we then roll a die to see who goes first. Every player starts out in the “rat race” portion of the game. The rat race is a representation of you having to go to work, at a job, to make a living. And it’s dubbed “the rat race” because it’s analogous of us, employees, being in a never-ending cycle of going to work and paying bills, just to go to work and pay bills until 65 (essentially we’re in a never-ending hamster wheel).
As you go around the rat race, you receive your monthly cash flow (what’s left over after all the expenses are paid), and if you land on the right spot, you’re gifted with opportunities. You tend to land on “opportunities” more than any other space on the board, because more spaces on the board are labeled as “opportunity” than any other item. I think Kiyosaki was hinting at something here. I think he was trying to tell us that we encounter more “opportunities” than we perhaps notice or pay attention to. But that’s a different story for a different day.
The objective of the game is to use the opportunities to generate enough “passive income” to exceed your monthly expenses. Once you’ve accomplished that, you are officially out of the rat race and onto the fast track.
Side note: You may remember from previous articles that passive income is income that is not reliant on your physical ability to perform (i.e., you’re not exchanging time in direct proportion to money earned). Passive income would be things like stock investments, business ownership (not self-employed; there’s a difference), real estate investments, automated businesses, etc…
We love to play the game because you have fun as you’re learning important keys to life. And those key ingredients that are a proven recipe for wealth building are what I want to share with you today. So without further ado, let’s dig into how you can use these 6 key ingredients to build some wealth of your own.
About a week ago, one of my best friends called me for advice on a financial move he and his girlfriend were considering making. As a couple, they had already hashed it out. But he wanted an objective, second opinion. So he begins explaining to me how his girl has a fairly new Toyota, in great condition with less than 50k miles, and it’s paid off. However, she’s really been itching to get this Audi, and was thinking about trading her Toyota in.
His advice to her, instead of trading her Toyota in, she should keep it as her “running around” car, and have the Audi as her “styling” vehicle (I’ve learned from him that the DMV area isn’t too kind to vehicles). He then says to me that he was thinking about having a “running around” car and a “styling” car as well, and asks what I thought about the idea. First, I had to confirm that I was hearing him right… “Sooo you guys are talking about going from two cars to four?” He answers affirmatively. Okay… so me being the loving, forthright friend that I am, I informed him that I thought it was excessive.
Given his reaction to my advice, I don’t think I told him what he was expecting to hear. I went on to explain to him that the reason I believed it was excessive is because it would mean double the insurance, double the maintenance on the car, double the annual tag renewal fees, and (in his case) double the car note. Now if you’re ballin’ like that, by all means, do your thing. But as good a paycheck as my friend and his girlfriend bring home, an honest assessment shows that they really don’t have it like that. Yes they can afford the “payments,” but technically, they can’t afford the final price tag (if they could, they wouldn’t need to finance this endeavor). And if you can’t afford the final price tag, you don’t have it like that.
As the conversation continued on with my friend, I became more and more concerned for the mindset he carried. And he didn’t carry it because he’s not a smart guy. On the contrary, he’s highly educated with both book and street smarts. However, society had conditioned him to think in a manner that only benefits big business. He was infected with consumerism, yet had never been diagnosed.
How did I know he was infected? Well remember last week how we talked about society changing the definition of affordability from one of, can I afford this final price tag, to one of, can I afford the payments? In listening to his logic, I could tell that he was asking himself the latter question. He was more focused on the payment, than the total money he would shell out over the long term. Good rule of thumb, always focus on the final bill, never the payments. Because creative financiers will always find a way to make the payments fit your budget, yet they have no concern for how long it’ll take you to pay it off, nor how much money you end up spending over the long term.
Another indicator that he was infected… he talked about buying a home as if a 30-year mortgage was the only way to purchase one. I believe his exact words were, “I want to buy a home before I’m like 35. Because I don’t want to buy a home at 40 and still be paying for it until I’m 70.” This particular line deeply pained me. Because I knew he had resigned himself to thinking that he would be trapped in a mortgage for 30 years. Why this resignation? Because he was exhibiting the first symptom of consumerism. What I’ve dubbed as, “Ninja Killer Syndrome.”
This isn’t the article I planned to write this week. I had actually started on one dealing with the 7 tethers of mediocrity. But after hearing and reading so many discussions regarding the cons of living frugal, I felt inspired to make a contribution to the discussion. Recently I read an article entitled, “A Case Against Frugality.” I must admit, being a strong advocate of living within your means, my initial posture to the article was one of resistance. I remember thinking to myself (in my most sarcastic inner voice)… this should be a good one. But ironically enough, it was.
As I read further into the article, I became more and more intrigued. Having realized the author actually had some really valid points, my posture became more and more receptive with each passing validation. To summarize briefly, he said that to live within your means was limiting. And that you should instead expand your means to meet your lifestyle. Now while I agree with his stance, it’s for reasons other than those he used to explain his viewpoint. And if you’ll bear with me through this article, I’ll do my best to explain why I think both frugality (living within your means) and frivolity (expanding your means to meet your lifestyle) should hold equal footing in your life.
My Case For Frugality
First, since my entire book is based on this premise, let’s discuss frugality. The reason I’m so passionate about learning to live within your means is because I learned first-hand how destructive it was to spend frivolously before I could really afford to do so. In my early 20s, I was taking vacations on credit, buying clothes and nice things on credit, paying for car repairs on credit, and at one point even buying groceries and gas, on what? You got it… on credit. I was literally living a borrowed life.
As is true with any house of cards, when the storm came, my house went. I’m embarrassed to say that I was the little piggy who built my house out of straw, instead of taking my time and building a house of bricks. I needed my house now, so I could go out and play. I didn’t want to wait for it. And because I, ultimately, didn’t get money, money instead got me. And I ended up being a slave to the lender (sad face) until I was 30 years old.
The funny thing is I don’t regret my house of straw. I know it sounds crazy, but hear me out. It’s because I lived in a house of straw that I learned to better appreciate my house of bricks. Essentially, I am who I am, because I was who I was. My mentor used to say that money will do nothing but magnify your true character (not who you portray yourself to be). And the truth is my character, in my early to mid-20s, was piss poor (mom if you’re reading this excuse my language lol).
You see, it was the very storm that caused my house to crumble that ended up being the instigator of my freedom. Like fire to gold, the heat perfected me, ridding me of all the impurities that had so long accompanied me in the form of poor money management habits. Compelled by circumstance to live well below my means, the lessons I learned during the storm completely changed my life and the principles by which I chose to live it. And that’s why I can’t disregard, for one second, the rightful place that frugality should occupy in one’s life. Here are just a few of the principles that frugal living have taught me:
A little over a week ago, a good friend of mine (we pretty much consider him adopted family at this point) had invited us out to Dave & Buster’s. His church was hosting their annual Christmas party, where they honor all of the members who volunteered at the church, in some capacity, throughout the year. Without a doubt, all 6 of us were going to support our adopted family member. And who in their right mind would pass up free food and free gaming? Nobody in my family, that’s for sure. We’re all greedy, and have a self-diagnosed addiction to arcade games
When we arrived at the event, we all had to sign in at the reception booth to get our meal tickets and game cards. The woman at the booth greeted us kindly and asked what kind of chicken we wanted for dinner? Barbecue or Balsamic? Apparently they had only ordered enough food to feed the people who had RSVP’d and didn’t want to risk running out (as they had the year before). So she warned us up front that we had to remember what we chose, because there was no going back once you did. The pressure was on.
Hmmm which do I choose? Balsamic is probably good, but barbecue will most likely be better. See I’ve only ever had balsamic vinaigrette on a salad, never on chicken. So my lack of familiarity with balsamic chicken shied me away from choosing it, and instead drove me toward choosing what I knew and was naturally more comfortable with. Everyone else in my party must’ve had the same thought process, because 1 after the other, they all chose barbecue chicken as well. All but one. I guess Shiela was feeling a little more adventurous than us other 6.
After a brief greeting from the M.C., we were instructed to enter one particular line if we chose barbecue chicken, and to enter another line if we ordered balsamic. Everyone got up in a surprisingly orderly fashion and proceeded to do as instructed. In a few minutes, we all had our plates and sat down to consume mass quantities, feeling pretty happy with our collective decision. Pretty happy that is, until Shiela (the adventurous one) sat down with her plate.
For some unknown reason, D&B had placed all the tasty treats in the balsamic chicken line. We (the majority) were stuck with chicken, rice, and veggies. While Shiela had pizza, teriyaki chicken kabobs, chips and dip… I mean, the works! The second she sat down I said aloud, “And that’s why you should always take the road less traveled.” Nobody got it but my younger brother, who had read the same Robert Kiyosaki book that I had. But we shared the meaning behind that statement with the rest of the table. And now I’m sharing it with you.
Some time ago, Robert Frost wrote a poem entitled, “The Road Not Taken.” If you haven’t read it before, no worries. I’ll write it out for you at the end. But to quickly paraphrase, in the poem a traveler comes to a sort of “fork in the road” and has to make a decision on which path to take. One path looks pretty well trodden. While the other could use a little more love. Why was one more frequented than the other? The poet never shares. But that’s neither here nor there.
So which route do you think the traveler chose? You got it, the one that was begging for somebody to traverse its path. The one begging for somebody to blaze its first trail. Our poetic protagonist wasn’t concerned about following the crowd. He was adventurous… just like Shiela. And in the long run, he was rewarded for it.
So what’s the lesson I learned from barbecue chicken? The lesson I learned from barbecue chicken is that you shouldn’t always choose the familiar. You shouldn’t allow past decisions to dictate what decisions you make in the present. You can use the past as a gauge, but it shouldn’t be your navigator. Familiarity may seem secure and comfortable, but life truly begins at the end of your comfort zone.
I learned that you shouldn’t always take the path of least resistance. In fact, I’m starting to think you should never take the path of least resistance. I say that because any and everything in life that I ever truly had to work for, were the most rewarding things. Whether it was my health, or my grades, or my financial security… it all seemed tough at the outset. And it was. But there’s nothing like overcoming a hard-fought obstacle then looking back at it retrospectively and realizing all the lessons you’ve learned, success habits you developed, and rewards you’ve reaped as a result of the process.
Why didn’t I write this article sooner? That’s the question I’ve been asking myself pretty consistently as of late. I’ve had this blog up and running for almost a year now, and until today I’ve never taken the time to share with my readers exactly why I started this website to begin with. Shame on me. But hindsight is 20/20, and it’s better late than never. So I decided to take some time today to explain to you exactly why I started this blog, my vision for Free in You, and what I hope to impart to you throughout this journey.
When I first conceived of Free in You as a business in my mind, I was going through growing pains of my own. Like most people, I found myself unfulfilled and frustrated with the many unfruitful pursuits for happiness that I had engaged in. It was to a point that I was listening to and reading any and everything to find that elusive “key to happiness.”
Have you ever found yourself there? Knowing, in your heart of hearts, that there’s more to life than where you are. Being disappointed in where you find yourself at current, constantly thinking I thought I’d be further along than this by now. I guess we’re all a little ambitious with our expectations and the timelines we’ve set for our lives. And deep down we know that these expectations are leaning more toward the unrealistic side. Yet we set those expectations anyway and inadvertently set ourselves up for failure in the process. And we do it all in the name of “happiness.”
Perhaps I’m being a bit presumptuous in speaking for everyone. But I truly believe that most of what we do is driven by a desire to be happy. We seek riches because we think it’ll make us happy. We seek success because we think it’ll make us happy. We seek relationships because we think love will bring us happiness. And to a certain extent that may be right. But it’s not the end all, be all. Want to know why? Because many people who have money, success, and relationships (most of these relationships having no substance) find that they are still unhappy. So if those aren’t the key then what is?
I’ve always been of the opinion that if you diligently search for something, it’s only a matter of time before you find it. And with that mindset in tow, I continued on with my search. I would not be defeated (guess it’s the driver in me). But my persistence paid off. In my searching, I learned early on that things (especially those with no substance) will never bring you the joy that you are seeking. You may find it temporarily, but long-lasting joy requires something deeper than “things.” Long-lasting joy requires substance. Long-lasting joy requires life balance. Long-lasting joy requires freedom. And that is the premise upon which I birthed this site.
When I was a 17-year-old Senior in High School, one of my favorite teachers, Mr. Hickman, was educating my classmates and I on the differences between being rich and being wealthy. It was the first time I had ever heard anything like that, so as you can imagine, I became completely enthralled in the discussion. For the longest time, I thought being rich and being wealthy were the same thing. But come to find out, I was sorely misinformed.
Over the course of the next 10+ years, I watched Mr. Hickman’s teaching play out in my own life time and time again. His words continuing to reverberate in my mind… “The goal is to attain wealth, not riches.” Mr. Hickman was one of the first people in my life to try and unplug me from the matrix. And as I really began to use my eyes for the first time and my vision became adjusted, I found myself trying to enlighten others to the same truths that were revealed to me.
As is common when trying to disrupt the status quo, those that were “conditioned” in their thinking resisted my efforts fervently. But despite their discomfort with the truth, it remained the truth nonetheless. And the truth is that one of the biggest misconceptions in society today is the belief that being rich and being wealthy are the same thing. Yes, by definition, the terms are quite synonymous. Yet, in reality, they carry two very different connotations. If you’re having the “huh” face right now, just bear with me. I plan on explaining in detail what I mean.
If you look up “rich” in the dictionary, you’ll find that it most commonly means having abundant money, possessions, or material wealth. If you look up “wealth” in the dictionary, you’ll find that it most commonly means to be characterized by or marked by abundance; specifically the abundance of things of value. I want to focus on the word “value” for a second. Because within it lies the differential upon which this entire article is based.
When you break the two terms down to their base, being rich is about accumulating a lot of stuff. While being wealthy is about what it is that you value. To get to the heart of that, I want you to ask yourself a series of questions. And take your time with these questions, so you can get to the heart of who you really are. The first question is, what is it that you value? And the second question is, why is it that you want to accumulate a lot of money? There’s a third question as well, but we’ll come back to that one later.
When I asked myself these questions, I came to find that I value God (my faith), time, freedom, peace of mind, relationships (familial or friendly), legacy, and happiness. And with the exception of God and relationships, deep down I believed that having more money could bring me all of these things. And I truly believe that the same could be said for most people. We really think that money and stuff will make or bring us happiness. No matter how many times some rich person comes back and tells us this is simply not true.
What I’ve discovered is that money, to an extent, can bring you those things that you hope for. But it is not the end all, be all. There is no universal law or principle which provides that a massive bank account is a prerequisite to more happiness, time, peace of mind, freedom, etc… I mean think about it, there are people who have all the time in the world, and no money. Then there are people who have all the money in the world, but no time to enjoy it. Likewise there are people who have it all and are miserable. Then there are people who have very little, and are overjoyed on a regular basis.
The apostle Paul, when writing to the Philippians, made mention of being content no matter your situation. I like to take it a step further and say be content, no matter your circumstance, but never satisfied. The key to attaining those things that you desire is to start exercising those things now. What do I mean by that? What I mean is that you can have happiness, time, peace of mind, etc… right now, using only what you currently have at your disposal. All it takes is a decision.
Everything you have or don’t have in life is a direct result of your thought life and your choices. You may have heard me say before, “Life is 10% what happens to you and 90% how you respond to it.” And I say it often, because it’s true. When your circumstances are less than ideal, choose to focus on those things you do have, instead of those things you don’t. When life throws you curveballs, choose to focus on ways you can do something about it instead of excuses/reasons why you can’t. The operative word here is “choose.”
Choose to be happy no matter the situation. I had to learn that I am responsible for my own happiness, not anything or anyone else. If you choose to believe that something or someone else controls your happiness, you give the power over to that person or thing. Word of advice… hold on to your power.
Likewise, choose to make time for those things you enjoy. The number one complaint I get from people is, “I’m too busy.” Again, you are responsible for your own time allotment. Not anything or anyone else. If your schedule is too full, learn to say “no.” Don’t take on anything that is not directly related to your purpose or your health or your enjoyment. The key here is balance.
When people ask me to take on some responsibility that I’m not too keen on, I politely decline and let them know that I highly value my time and don’t want to over-obligate myself. And I urge you to do the same. Take “being busy” down off that high pedestal. Because a lot of activity doesn’t necessarily equate with productivity. The goal is to work smarter, not harder.
And speaking of working, if you find yourself having to work multiple jobs to maintain your lifestyle, then it may be time to examine your lifestyle. Are you living above your means? Do you have a lot of stuff that equates to wants instead of needs? Are you seizing opportunities to improve your station? Meaning, have you taken the time to educate yourself and make yourself more valuable to your current or potential employer? And I’m not just talking traditional schooling. I’m talking self-education as well.
I really want you to think on these things. As Joyce Meyer would say, “I want you to think about what you’re thinking about.” It’ll give you some clues as to why you are where you are. And it will also clue you in on where you’re heading.
I hate to say it, but this article went completely into left field. I’m sitting here with my outline right next to me. Yet I find myself rambling on about things I had no plans on discussing. But I guess this is what my spirit wanted to get across today. So I’m just going with the flow. I hope you can bear with me just a little while longer. Now that you have a full understanding of what I mean by exercising your wants today, let’s dig into the meat of this wealth versus riches thing.
A few days ago, my brother came to me and said he was planning on purchasing a car in November of next year. And his goal was to have a “stupid, large down payment” saved up by then. And while large down payments are a good idea, I informed my brother (graciously) that his priorities were ill-placed. Naturally, his response was “Really? How so?” And I’m hoping your response was the same as his. Because I’m certainly about to tell you.
In a world where cash is glorified as King, I can see why credit is often mistaken for the pauper. But the reality is, these days, credit is the true Khaleesi. For you non Game of Thrones fans that’s Westeros code for rightful heir to the throne (well it’s really my play on the title of one of the characters, but you catch my drift lol). And just like in the story, the pauper has come to reclaim his crown.
It is true that at one time cash was all you needed. If you had cash, you held all the cards. And that is still true to an extent. But nowadays, your cash, in many instances, is not enough. Just ask the litany of people who have ever heard, “No credit is worse than bad credit.” Most of those people were living their lives on cash, but unfortunately left no tangible track record of their financial wherewithal. Essentially, they have no “evidence” that the bank is willing to rely upon to prove they are creditworthy beyond a reasonable doubt.
The true reason I say credit is the rightful heir to the throne is because you need it for almost everything these days. You, of course, need it for any type of loan transaction. But you also need it when you book hotels or car rentals (unless you want to pay deposits). You need it when getting a quote for insurance. If you’re an attorney like me, you need it to prove you’re “fit” to practice law. Shoot you may even need it to get a job (yes some employers do pull your credit report when deciding whether or not to employ you). My point is you could be leaving a lot of money on the table, in many different areas of your life, if you neglect your credit score for the sake of cash.
What I ended up telling my brother was that he would be better served if he took that down payment money and instead used it to restore his credit score. Why? Because, first, it would give him a better bargaining position when dealing with the finance manager. As you may remember from last week, having a good credit score greatly improves your negotiating position when purchasing a vehicle. Second, he’d get a much lower interest rate on his car. Potentially saving him thousands over the long term life of the loan. Third, it would benefit all areas of his life financially. Not just in the realm of car buying, but in loans generally, lower car insurance payments, better employment options, more flexibility with hotels and car rentals, and much, much more.
As I stated in my article last week, one of my favorite quotes comes from John Hope Bryant, in which he stated, “Nothing changes a person’s life more, other than love or God, than a 700 point credit score.” I, wholeheartedly, stand behind that statement. Because I’ve lived it. My goal with this blog is to save you money and to give you options. I want you to come away with the freedom to make choices. And I’m telling you, as long as bad credit is one of your jailers, you will never come to know true financial freedom. Banks want to lend you money (that is after all how they make theirs). So show yourself approved and watch your life change. Until next week…
P.S. – This is my shortest article ever. I’m proud of me. I know I have a tendency to be long-winded. But that’s just because I want to make sure you get it. I’m trying to work on my brevity though. And this article is just one of many steps to come in the right direction.
This week we’re going to take a break from the personal finance realm and talk a bit about a more overlooked, yet sorely needed subject: People Skills. Recently, I did a presentation at work that was all about people skills, and my coworkers absolutely loved it! A week later and they’re still talking about it. I don’t say that to brag on me, I say that to point out the huge need for us, no matter our position or profession to understand ourselves and the people we’re surrounded by.
A few months back, I took a course on negotiation as part of my continuing legal education requirements. And two things really stood out for me. The first, that people are predictacle. They may be predictable in different ways. But once you understand that person’s way of communicating, they become as predictable as the arrival of the next second. The second thing that stood out was the fact that the ability to communicate effectively is the most important skill any human being could ever possess. As I often tell my friends, people can have the same experience but experience it differently, all because of misperceptions and/or miscommunications. To put it simply, it’s not always about what you’ve said, it’s more so about what the receiver heard.
Going back to the presentation at work, the reason it was such a huge success is because my coworkers found out things about themselves, about how others viewed them, and about the differing personally types and means of communication of those around them. It really illuminated some things for them (especially those coworkers who were married or recently divorced). And because they gained so much from it, I thought it only fitting that I share some of those same insights with you.
Now being the lawyer that I am (smiles), I’m going to share the same disclaimer with you that I shared with them. I’m not a guru on people skills. I’m really not a guru on anything except basketball (that’s the only area I put in the requisite 10,000 hours) if I’m being honest. But I can share with you what I’ve learned, which is quite a bit. And I hope that it will immensely bless you.
Since business is nothing but connecting with people and building relationships, the bulk of my presentation focused on the four personality types. I’m not taking DISC or Myers-Briggs personalities. I’m referring to the personality types as laid out by Florence Littauer in her book Personality Plus. If you haven’t read it yet, I highly suggest you do.
In her book, she provided that there are four main personality types. And everyone is a unique blend of these four. It’s very rare that somebody is 100% one type. Most people, in fact, have two or sometimes even three dominant personalities. In a non-schizo way of course.
She starts her book by providing you with a personality profile test so you can better understand your own unique blend of the personalities. And if you buy the book for no other reason than to take the test, you will have received your money’s worth. Believe me.
There’s no way I could relay her entire book in a short article (well this article isn’t so short, but you get my point). And truthfully, I doubt I would if I could. That would be doing her a grave disservice. But I’ll do my best to give you a base understanding. And if it peaks your interest, buy the book to get a more detailed understanding of her concepts. Fair enough? Well let’s dig into these personality types…
A couple of weeks ago a friend of mine went out and bought a new car. And although he got a good deal, he left a lot of money on the table. As you may have picked up from reading my articles, I’m all about getting you the most bang for your buck. Since 50% of America makes $50k or less, we really need to make those salaries stretch so we can still enjoy our lives on a budget.
My goal is to make you all professional ballers on a budget lol. So in the spirit of budget balling, below I give you 7 surefire tips that guarantee the next time you buy a car you don’t just get a good deal. You get a great one!
1. Get All Your Duck(et)s in a Row
For those of you that don’t know what duckets are, that’s 90s slang for cash, money, dinero. I may have just aged myself a bit lol. But on a serious tip, if you’re thinking about buying a car, you really should endeavor to have your financial situation together. Buying a vehicle is a long term commitment, and you shouldn’t rush into it. And you definitely shouldn’t purchase one out of desperation (nothing good comes out of emotional spending).
If you really want to get the most bang for your buck, I recommend above all things that you work on raising your credit score above a 700. I heard John Hope Bryant, founder of Operation Hope, state that “nothing changes your life more, other than God or love, than a 700 point credit score.” And he’s absolutely right. I know from experience that a good credit score really changes things for you. And it isn’t as hard to do as you may think. It takes time, but it’s not impossible. You just have to put your head down and grind it out. Trust me, it’s worth it. It took me two years to get my score above the 700 mark, but when I came out on the other side, I saw first-hand how having a good name can drastically change your life. If you haven’t already, definitely take some time to read my two articles on credit scores.
Once you’ve raised your credit score, I recommend either saving up 20% for a down payment (most dealers want at least 20%) or having a car to trade in. The last two times I just traded in a car and didn’t have to put down any money. But if you don’t have a car to trade in, I strongly suggest saving at least 20% of the car’s value for a down payment.
And last but not least, secure a pre-approval letter from a lender prior to visiting the lot. My mom once told me that’s as good as going to the lot with a cash offer. And she was absolutely correct. For my most recent car purchase, I went to the lot with a pre-approval letter and ended up getting $7,500 off my purchase price. Cash buyers always have a better bargaining position with dealers. Try it out for yourself and see.
2. Be Purposeful About What You’re Looking For
I once heard that if you don’t know where you’re going, every road will take you there. That’s something I think is true and applicable in so many areas of life, including car buying. One of the biggest mistakes I think people make is going to a lot and not knowing what it is they really want and/or need.
Before you show up to a dealership, you should already have in mind what’s important to you. Are you concerned with the features in a car (Bluetooth, gps, back-up camera, etc…)? Is the aesthetic value of the car really important to you? Does the car have to be economical? If so, what’s the lowest miles per gallon that you’ll find acceptable? Is the MSRP of great importance to you? If so, what’s your price range? Are you a $20k buyer or a $30k+ buyer? All of these questions should be answered before you even step foot on a lot, so you can narrow down which “roads” to take.
Today’s article is all about starting the process of building wealth using those things that are already available to you. I guess I’m somewhat of a pragmatist in that I don’t vest my interests in abstract ideas and theories. I would much rather spend my time learning and teaching about tangible ideas, and the practical application of those ideas. Which is why today, I’m going to share with you 7 steps to building wealth that you can implement in your life right now. Kiss procrastination goodbye and lose all of those excuses. Today marks the date where you stop thinking about reasons why you can’t, and start thinking about reasons why you can. We’ll call it your financial paradigm shift.
Now I don’t want to disillusion anybody, just like in the credit score article last week, building wealth will take time. I know because I’m still in the midst of working my plan. But don’t be distracted or discouraged by that. It’s actually a good thing. The Word says that wealth that’s unearned or comes from get-rich-schemes quickly disappears; but wealth gathered little by little grows over time. Why? Because true wealth comes gradually, as it is a seed born of knowledge and persistent purpose. Almost anything that comes quickly, goes the same way. So though we live in a society where everything seems to be instantaneous, always remember that anything worth having is worth waiting and working for.
1. Always Pay Yourself First
A part of every dollar you earn is yours to keep. What do I mean by that? I mean that of every dollar you make, you should save at least 10% of it. Most of us complain that when we get paid, we feel like nothing but middle men between our employer and those we owe. We get paid, we pay bills, then we’re broke again until the next check. But I’m here to tell you that though we are accustomed to this style of living, it is not the proper way of living.
The goal here is to learn to live off of less than what you earn, so you can start building your fortune by utilizing the stream of income you already have access to. It’s a discipline thing. And it starts when you change your way of thinking. If you start today with putting 10% of your earnings into savings, over time you will develop the habit of living off of the other 90%, and before you know it you won’t even miss the money.
In his book, Richest Man in Babylon, George Clason states, “Wealth, like a tree, grows from a tiny seed. The first (money) you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed, the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.” But don’t take my word for it. And don’t take George Clason’s. Try it for yourself and see.
As a side note, I do want to express that as a believing woman my true belief system is to pay God first, and yourself second. And I have very substantiated reasons for believing as I do. But since the principle of giving is an article unto itself, I’ll save my reasoning on that subject for another time.
2. Control Your Expenditures
At no point should your “necessary” expenses be equivalent to your net pay. I think where the trouble comes in is people often blur the line between desires/wants and necessities. I know this is the case because more often than not, if you make more, you spend more. But what people fail to realize is it’s not about how much you earn. It’s about how much you keep.
If you study carefully the habits of living you’ve grown accustomed to, you’ll find that in between all the minutia are hidden expenses you’ve come to accept that you can actually reduce or altogether eliminate. Do you really need that gym membership if you only go once a year? Do you really need that 200+ channel cable package when you only watch 20 channels? We all waste money on conveniences that we really don’t need. You just have to take the time to examine your financial bushes and trim the excess.
The best way to trim the excess is to place all of your expenses into one of three categories. The first category you label as necessity (i.e., food, utilities, rent/mortgage). The second category you label as wants but fits within the budget (i.e., cable, high speed internet, hulu subscription). The third category you label as wants but doesn’t fit within the budget (only you know what that is). Anything that falls within this third category should be eliminated from your monthly expenditures.
Now don’t get me wrong, I’m not saying that you shouldn’t enjoy your life. In fact I caution against overstraining yourself by divesting your life of any and every want. What I am saying is that anything taken to extremes becomes dangerous. You should enjoy your life, especially when you work so hard for it. But all things in moderation, including wants. If it disturbs your ability to save 10%, then it needs to take a long walk off a short pier.
I'm an attorney, blogger, entrepreneur, movie buff, video game geek, and athlete all wrapped in one. But more importantly, I'm a personal finance enthusiast who wants nothing more than to see you debt free and stress free.
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