7 Ways to Avoid Financial Failure
1. Become weird
Only 5% of Americans become financially independent. 95% spend first and never save at the pace required to become financially secure. It was true 70 years ago. It is true today. You must become weird to become successful.
2. Treat Debt like a House on Fire
“The rich rule over the poor, and the borrower is slave to the lender.”
King Solomon, Proverbs 22:7, NIV
This isn’t about the media whine of the rich victimizing the poor. Solomon was a wealthy and a just king. It is about a choice. Will you choose to dig out of debt, or allow yourself to be victimized by your own lack of fiscal discipline and remain economically enslaved?
3. Develop discipline
“There’s a tradeoff in life, ounces of discipline versus tons of regret.” Jim Rohn
Don’t allow your lifestyle to dictate your financial goals. Your financial goals must dictate your lifestyle.
Discipline shows up as when you create a budget and live within your means. It shows up when you complete a course of study to upgrade your skills, or delay a purchase, or begin to take action towards a long-term goal.
Discipline is a muscle that must be used, or it atrophies to weakness. Don’t be that person.
4. Control your spending.
“Wealthy people save first and spend what’s left over. Poor people spend first and save what’s left over.” Jim Rohn
36 years ago I heard Jim Rohn speak. When he said these words I thought “Duh. It’s easy to save if you are wealthy. That has nothing to do with my situation.” The next morning, as I was waking up, Mr. Rohn’s words went off like a thought grenade in my head. He didn’t mean that at all. What he meant was that no matter your income, if you control your spending and live on less than you make, you can become wealthy over time.
The media consistently identify high-income earners as wealthy. Often nothing could be further from the truth. I have reviewed the finances of people who make a million a year and need to borrow more money every year to pay the IRS. On the other hand, I have known couples who never made more than $60,000 a year yet have accumulated over $1,000,000 in retirement savings.
5. Develop a “Good Enough” mentality.
“The vast majority of financial disasters occur (a few dollars) at a time.” Jim Rohn
The favorite new care purchases of self-made millionaires are Honda and Toyota, not a Mercedes or Beemer. The favorite sports car is a Corvette, not a Porsche or Maserati. Suits: Joseph Banks or JC Penny. Dress watch? Under $300. Think Seiko or Timex. A Honda Accord Sport will set you back a mere $25,000, the Lamborghini pictured above ten times as much. I expect the lifestyle expectations of the model if she came with the car as advertised, might be millions more.
I love lattes. I used to have a major Starbucks habit. I now mix my lattes at home. I take home perked coffee and mix it with powdered milk. No foam on top with a cute design. The taste is probably 5% less enjoyable than that great grande. Good enough. I estimate the savings are over $3/day, $1,000/year. That much more money to accumulate towards long term goals.
6. Be open to doing things differently.
Study real data about real daily habits of real millionaires. Hint: They are mostly the opposite of the glittering rich that the media obsesses about. Be open to changing your environment to change your behavior. Tip: A great place to start is The Next Millionaire Next Door, by Thomas Stanley, PhD and Sarah Stanley Fallaw, PhD.
Years ago, I met with a very wealthy self-made man who owned several hundred rental homes. Another financial planner had brought me in on the case for my estate planning expertise. As we drove up to the man’s office, one of those clapboard post-WWII homes that he owned, we noticed four old beat-up pickups and one brand new Cadillac Escalade, with tricked out custom wheels, the ones that keep spinning when the SUV stops. I told my friend “I’ll bet you dinner out with the wives that the Escalade belongs to a renter, the pickups to this millionaire and his kids that work with him. I won the bet. The Escalade was a renter bringing in his late payment.
7. Be Weird
Traits that self-made millionaires say contribute to their success:
- Frugality –Live on less than you make
- Hard Work –show up early, stay late, keep learning
- Perseverance — never give up.
- Conscientiousness — do what you say, finish what you start
- Self-Control
- Supportive spouse –be one first
- How they managed their career — focus on your strengths (ask others what they are)
- How they managed their day-to-day finances
Imagine a future a few years from now, where you have imitated the truly wealthy, not the myths perpetuated by our culture. You have saved first, reduced your lifestyle, eliminated debt, built up savings, and created a fortress balance sheet to cushion against financial misfortune. Imagine how fun it will be to be weird.
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