Playing like a Bigshot

Big shot

Have you ever made a bad decision and later wondered why you made it? Have you ever done something that, even though you know it is wrong, you just couldn’t stop yourself?

How we react to daily situations is a combination of our hard wiring (genetics and how we were raised) and the intellect that we use daily to make decisions. Deep down inside of each off us, we feel a certain way about ourselves (ego) and we act according to this self perception and about how we feel perceived by those around us.

When it comes to money, this is a powerful combination. We may know in our brain that we should act in a certain way, but the desire to feel loved, recognized and appreciated often undermines actions that we (know that we) should take.

Last summer I was overseas working with two colleagues. We were in a hotel (company paid) that had a free laundry service. The workers in the laundry were from Pakistan or Bangladesh. By Western standards, they were quite poor. I believe that their monthly salary was about $300 (US). This might not seem like a lot off money but as I talked to some of the them, I learned that it is quite a fortune. The average worker in their country earns about $50 per month with nothing left over for savings or luxuries. Working at this hotel, the worker could send home $50 to pay the family’s bills, take $50 for “spending money” and still save $200 per month. After a year long contract, the worker could return home with $2,500 and start a business. This one year long sacrifice could change that family’s situation forever.

Now add to the mix, about 100 American expat workers. Along comes the first “big shot” who “tips” the laundry guy $3 to wash the laundry that the worker is already paid a salary to wash. The American worker feels justified paying $3 for a tip because, after all, the laundry was “free” (paid by his employer). And then, the next guy thinks, “Oh yeah, he tipped, so I should tip too.” And a year later, when I arrived, EVERY guy was tipping $3 per week to get his “free” laundry done. Now, do the math. This $300 per month Bangladesh worker is now taking in his salary PLUS $3 per guy in tips per laundry load. Multiply this x 100 guys for four weeks per month. The “American do-gooders” were giving this guy, outside of his “normal” pay, an extra $1200 a month. This is a 400% tip on top of his regular salary that is already 600% of his national average!

Later, I refused to tip at all and the Bangladesh worker gave me a dirty look. When we picked up our clothes the next day, everyone else had folded clothes and mine were a half-wet ball in the laundry bag. His job was to wash and and fold. But because I didn’t tip, he REFUSED to do even the basic service that was required of him. We had spoiled this worker so that now he expects a tip. No, he demands a tip. My one colleague Matty tipped him $20 one day. I was livid. I told Matty that he was wasting his money and was “screwing the rest of us” because soon this worker will come to expect $20 each time he does our laundry. Matty’s reply was, “Well, don’t be so tight, you can afford it.”

Think about the logic of that. I can afford it.

That’s what poor people say.

I’m a millionaire and I doubt that Matty will ever be. He will constantly chase credit card bills, struggle to pay his mortgage and will complain that he “can’t get ahead.”

Think about the logic of this:

This Bangladesh worker is already earning 600% of his “normal” wage at home. This is the equivalent of an American worker taking a job overseas and getting $270,000 per year (six times national average of $45,000). Now, imagine if you took a job overseas making $270,000 working in Saudi Arabia. And then, as Saudis came in to get your services, they handed stacks of $100 bills. By the end of each month, your tips amount to a million dollars in cash. Does that seem reasonable to you? Well, that’s what we did with this man. We were giving him, when compared to the wages of his country, about a million dollars per month when compared to US wages and living standards.

Later, we went for a $5 haircut and matty paid $20 ($15 tip).

I debated with Matty and some other colleagues. I explained that we were giving this guy a fortune, and for what? Matty explained that he was “helping” the guy. I said that his regular salary was a small fortune and that his “help” was just a waste of his money. Matty then said something telling and I immediately understood WHY he tipped. He said, “When I give that guy the $20 and his face lights up, it makes me feel good.”

Ah ha. The reason why Matty was tipping was because it made him feel like a big shot. It made him feel rich compared to this lowly Bangladesh worker. I then realized that Matty didn’t care about helping this guy, he was showing off in front of him. I thought about how so many people love to over tip in America and I realized that it has less to do with manners and showing appreciation; it has more to do with showing off one’s success and wealth.

Now. If your net worth is over a million and you earn over $100,000 in passive income, your house and cars are paid, you have enough $ for your children’s college education and your 401(k) is maxed out, then go ahead. Tip away.

But, if not. You’re taking money out of your retirement, out of your children’s education, out of your gfamily legacy AND YOU ARE GIVING IT AWAY TO A STRANGER.

Think about it. To stroke your ego and to make you feel “rich,” you’re giving away your family’s legacy.

Some days, I walk around in a t-shirt and flip flop sandals. I still wear my expensive watch, but I dress comfortably. I might be at the mall and I’ll see some young guy with his Rolex, expensive car and I know that he’s up to his eyeballs in debt. I know INSIDE of myself that I’m the big shot. I don’t need to drop a 600% tip on a stranger to feel like a big-shot.

There is a difference between the two and they both revolve around your confidence level. People who are not confident in themselves need the placebo of success that comes from the 30 second “approval” they get from the waiter when they over tip. And in the end, that $3 here and that $15 there add up. If saved and invested, over a decade or two, they can mean the difference of having enough $ to buy that distressed rental property or to snatch up a choice asset in a fire sale. That one asset can turn into an income stream or a sale with a big dividend that can be invested again and again.

People who tip big always seem to be broke and complaining about money. I’m smart with my money and I don’t feel the need to impress anyone. I’ve impressed myself. That is all that is important.

A valuable lesson learned in Hawaii

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A Hard Life Lesson Learned on Molokai Last Week
By Dr. Steve Sjuggerud
Wednesday, August 6, 2014

Stansberry Research

I learned a hard lesson last weekend… on the island of Molokai, of all places…

I was checking in as a competitor for the 32-mile Molokai-to-Oahu paddleboard race, when the race director said to me:

“Steve Sjuggerud? Are you related to the Steve Sjuggerud that writes an investment letter?”

It turns out, the race director is a subscriber of mine…

He is living right…

He is 64 years old – retired from a corporate job – and he could pass for a fit athlete in his 30s (if he dyed his hair). He lives in Hawaii, and he surfs every day there are waves.

I met up with him at his house after the race, and we talked a lot about living… and living right.

“I see a lot of friends with huge mortgages, spending more than they earn,” he said while we sat at his kitchen table.

“I do the opposite. I live way below my means… But what more could I want?”

I looked up from his kitchen table, and looked all around…

He was right. He has everything he needs, right here. He lives a short walk from his favorite surfing spot in Hawaii. He lives lean and healthy. His life is about experiences, not about stuff.

I want to be like him when I’m 64.

Heck – I want to be like him right now…

I thought I was living right. But now I think I’ve gotten off track.

The Molokai race was an eye-opener for me about getting off track…

This race is 32 miles across “the Channel of Bones” between two Hawaiian islands. I did the race as a three-man team, on a standup paddleboard. (Each person takes turns, jumping out of a chase boat.)

I’m glad I had good teammates, because I didn’t do so well…

I have excuses for not training as much as I should have – I’d broken a rib two months before the race, and I’d been sick for much of this year before that. But those are just excuses.

I had one nagging thought:

Money can buy you a lot of things in life… but it can’t buy you fitness. You have to earn that yourself.

And ultimately, if you’re unhealthy, who cares how much money you have?

Now that I’m home from Molokai, I realize I need to make some changes…

• I need to clear out more stuff. I need to live leaner.

• I need to make my health a top priority. Work and family always seem more important than working on my health – but I have to convince myself that I’m better off for my work and my family if I’m healthy.
How can I make my health a priority?

I have a clear path… for the next year at least.

I need to “right my wrong” in this year’s Molokai race. I need to get fit – for real – and do MUCH better in the race next year. (I haven’t told my wife this goal yet… I’m not sure she wants to hear right now that I want to go back next year and do this again.)

I know that nobody cares how I did in the race. But I care…

I realized on the water that I was fooling myself about my level of health and fitness… and that’s not something you want to fool yourself about!

I have a long way to go to get where I want to be, fitness-wise – but at least I have a one-year goal that will drive me.

Are you like me? Do you have some money… but not the level of fitness that you want? Then what are you going to do about it?

What is your goal?

Over the next year, I’m going to live more like my Hawaiian subscriber… I’m going to live leaner… and healthier.

How about you? What are you going to do?

Are you going to muddle along? Are you going to keep fooling yourself, like I was? Or are you going to make some real changes?

You can’t buy your own fitness. You have to earn it. The best thing, for me at least, is to have a goal in front of me that I’m striving toward.

What’s your goal? If you don’t have one, then find one… and get to it!

Best of luck!

Sincerely,

Steve

How Less Consumption Leads to Early Retirement

From Yahoo Finance:

Do you want to retire early? Then spend less and save more. You’ve probably heard this advice preached countless times and completely agree with it in principle. But you know how it goes. Saving money makes perfect sense, until you actually see something you want, and then every urge you’ve learned to control goes swiftly down the drain.

In the heat of the moment, you don’t think too much about the impact of a seemingly small purchase. But how much are you really giving up when you give in to small purchases? Here are a few reasons daily spending lengthens the amount of time you will spend in the 9-to-5 grind:

Your expenses are directly tied to how many years you need to work. The fewer dollars each paycheck that go to spending, the more you have left over to invest. No surprises there. But a smaller monthly outlay also lessens the load your nest egg will need to pay for in retirement. Spending just $5 per day on a coffee fix or other convenience food will cost you $1,825 per year or $54,750 over a 30-year career. For people who earn around a $50,000 salary, that’s an entire extra year of work just to pay for $5 worth of daily discretionary spending. If that worker spends close to 9 hours a day at work or commuting and works 20 days per month, that’s 2,160 extra hours of dealing with work, boring meetings, incompetent bosses and the commute, just to finance a daily $5 purchase.

Avoiding discretionary purchases could help you retire sooner. If you instead saved that $5 per day, you could not only retire a year earlier, but perhaps much earlier than that due to the compound interest on that $1,825 you tuck away each year. Saving just $5 per day in a 401(k) will grow to $178,856 over 30 years, assuming 7 percent annual returns. That’s about three and a half fewer years you would need to work if you earn $50,000 per year. And if you also get an employer match of 50 cents per dollar contributed on that money, you will have $268,284 after 30 years, which is 5 and a half years’ pay for the same worker.

You don’t need to save up as much. When your expenses are less each year, you can live well with a smaller nest egg in retirement. If you learn to live on $40,000 a year, even if you earn much more than that, you only need to save up enough to cover the $40,000 per year in retirement, not enough to replace your current salary. In fact, living on $40,000 per year, working hard to earn more than that and saving the difference is one of the fastest ways to retire early.

It’s much easier to come up with income to replace the smaller lifestyle. A smaller monthly budget can also add to your peace of mind in retirement. When your standard of living is entirely dependent on what the markets do, it’s hard to not be nervous whenever valuations gyrate. But what if your spending is so low you can easily come up with the difference by working part time? Obviously you can still aim big and try to get a large salary back. But if an easier to find and less stressful job can fulfill a possible income shortfall, then you don’t have to worry so much about investment performance and can concentrate on enjoying retirement.

For some people, spending less is extremely hard. We all live in the same modern society that celebrates consumption. But think about what you are giving up whenever you click the “buy” button. Is years of working worth the extras that you will forget about after owning them for a while?

Visit MoneyNing.com for more personal finance discussions. This site also helps readers decide whether a 0 percent balance transfer card is worth signing up for and keeps a good list of helpful promotion codes.

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Its all about your attitude

Happy grimmace sad

As I think more and more about the road to financial independence, I become more and more convinced that your attitude is the primary factor for success. Unlike the graphic above, whether or not you are happy or sad won’t decide if you will make a million dollars but your attitude towards getting to that goal will be everything.

At my work I’m surrounded by colleagues who make six figure salaries and barely can put together ten thousand dollars for a house down payment. There is NO reason why they can’t be financially successful (savings I mean, not earnings) except for their attitude. They treat money like air, something to be breathed in and out without a thought to saving, investing or planning for the next step in their lives. Opportunities about; the average person probably has about a half dozen opportunities in their life to stake a claim on their fortune. Whether or not you are prepared will mean everything.

I have one old buddy from high school who started real estate investing in the last 6 or 7 years. I even went in on one of his deals and it is paying off nicely. He first bought a 3 room house and then rented it followed by a one bedroom apartment. He paid enough down so that his monthly cash flow was positive on both properties. Later he bought (also with positive cash flows) a 3 unit condo complex and later a 4 unit apartment building (the unit I helped to finance). He has just informed me that he closed on an 18 unit apartment building. Each property has a positive cash flow and I estimate that he is earning somewhere between $6,000-8,000 per month in EXTRA income.

I say extra because he still has his job and his wife still has hers. Because the cost of financing is cheap (rates in the 4% range), he uses the extra $6k each month to finance new properties. After a year, you have an extra $80k – this can be used for a down payment on a new property. I guess that he will hit his million in a decade.

Realize now that he started with NOTHING. He and his wife worked, skimped and saved until they had enough to buy their first rental property. After that, they skimped and saved more. And over time, it is paying off handsomely. I suppose that in a few years he will be so busy managing his properties that he won’t have time to go to work. What a glorious day that will be when he can quit his job and be self employed.

The American Dream.

And so, what set him apart from his friends and colleagues who aren’t growing their net worth like him? It was all his attitude. He made a goal to own 20 properties and started with just one. When his first was bought, he set his sights on the next.

It was all ATTITUDE.

If your attitude isn’t such that your mindset is that you’re ALWAYS looking for your chance to stake a claim to one of your life’s jackpot opportunities then you’ll probably never succeed. Have an attitude check on yourself and ask if you’re motivated and focused on becoming a millionaire. If you are, you can find a way. If you aren’t, someone else will take that opportunity that you pass. They’ll be the “lucky” one who was “at the right place at the right time.”

Luck is when preparation meets with opportunity.

Good luck!

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

Debt

If you are in debt, you will never get rich.

This is perhaps the most important reason that most Americans (and others around the world) have such difficulty attaining financial independence.  Your goal is to save money and have it work for you.  Think of the little green dollars as slaves, if you have a hundred of them and you put them to work, they will produce some returns for you.  You add to them and over time they add up.  But with debt, it is the opposite.  Whatever money you have in the bank and your earnings get swallowed up in interest charges.

The average credit card charges almost 20% interest.  If you put something on finance and don’t pay it off for 5 years, you will end up paying 200% the value of the item (5 years x 20% interest = 100% in interest).  If your “normal” monthly expenses are $2,000 and you put a portion of your living expenses on credit, your monthly costs may be $2,500 or more.  That $500 a month could be going into your savings account.

If anything, you want to be loaning money, not borrowing it.

I have one brother who has a great job (he is a co-owner of a fair sized corporation) and makes a fat salary.  But, he loves his credit cards and constantly carries a balance.  This “easy spend” lifestyle eats away at his savings potential and the interest charged on the rolling balance keeps him in perpetual debt.  If he would just cut his spending for 6 months and pay off the cards, he would be able to return to a “similar” spending lifestyle and be able to keep the savings (what he’s not paying in interest) and begin to build his savings.

Debt is just stupid, don’t do it!

In 20 years, I have paid my credit card off each month in full.  And the only reason I use a credit card is for the frequent flyer miles.  The ONLY debt I have carried in 20 years is my mortgage.  Even my car was paid for with cash.

If you can’t afford to pay cash for your next car, ask yourself, “do you really need it?”  I’d rather drive an old car and have people “think” I’m poor than to be poor and have people think I’m rich.

Live will bring you dozens of opportunities to get rich.  If you are in debt, you will miss them all.  A lot of people blame others for their lack of financial success – and most of these people are in debt.  Don’t make this mistake.  If you are in debt now, get out of debt.  Cut your spending, take some overtime or do whatever you must to get out of debt.  If you are considering taking on debt (credit card use or buying a new car), don’t do it!  It isn’t worth it.

I’m growing richer each month loaning money to others and rolling the interest back into new loans and investments.  My investment portfolio is monthly returning about 1/2 of what I receive in paychecks each month.  This money just compounds and some day, my investments will yield more than my salary.  At this point, I will be free to quit my job if I want, and I’m only in my early 40′s.  This journey to becoming a millionaire would NOT have been possible if I was carrying a debt load.

Good luck & good investing!

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

Charity

photo from Frontlines of Revolutionary Struggle

A few years ago my sister told me that she and her husband had saved an extra $1,500 from their tips that month – both worked in the food service industry.  I was excited for them.  They have always lived paycheck to paycheck and I thought that they finally had a way to “turn the corner” and begin a savings account that might lead to a down payment on a home.  What she told me next both shocked and disgusted me.

My sister told me that they gave $500 to their church and the remaining $1,000 was divided into five dollar bills.  My sister and her husband then went and handed out the $5 bills to homeless people as they “witnessed” to them about Jesus and Christianity.

Whether or not you are religious – try to put that aside for now.  And I can understand supporting your church in the form of monthly tithes (donations).  But to give away your entire savings for the month, when you don’t even have a cash “emergency fund” in the bank is, in my opinion, not only foolish but also reckless.

If you do not have a savings account of at least 3 years net wages AND a fully funded 401(k) and/or IRA plan, YOU HAVE NO BUSINESS DONATING TO CHARITY!

I have a favorite charity.  It is called the Samuel charity.  My investment account is my charity.  And every month, every available dollar that I can find goes in to be invested to generate even more wealth.  I have over a million dollars in the bank and I still don’t give a nickle to charity.

And neither should you!

Warren Buffet, Bill Gates and Bono should be donating to charity.  Some rich folks give a couple of million and we applaud them.  In reality, most give only a small fraction of their net worth.  Warren Buffet and Bill Gates are actually making sizable contributions to charity and for that I applaud them.  But leave it to them.  If you haven’t earned your million yet, leave the charity giving to the rich folks.

Sound greedy?

It is.  But  you have to be greedy if you want to be a millionaire.  Money doesn’t grow on trees.  You have to fight and scrape for every dollar and donations to charity are hazardous to your financial future and well being.

Does it sound rough?  Yes it does.  But I’ll say it again.  Quit donating your hard earned money to charity!

If an aircraft is suddenly depressurized, what is the first bit of instructions that they give you?  Put on your own mask first before helping others.  If you haven’t funded your retirement account and you don’t have an adequate emergency cash account, why are you putting a financial oxygen mask on others while you suffocate?

I read an article in Bloomberg this week that stated that millions are starving in India as donated food is pilfered by corrupt officials.  Most of this aid comes from donations from western countries and the distribution is so bad that upwards of 10% of the food rots before it can be delivered and what remains is stolen by corrupt state officials and sold for handsome profits.  Have a look at the article:

Poor in India Starve as Politicians Steal $14.5 Billion of Food

I see a story like it every week.  Last week I saw a story about a woman who claimed cancer to get her wedding paid for – she made the whole story up.  A large amount of every charity dollar donated goes to pay some bureaucrat or administrator.  Some day, when I feel “comfortable” in my financial position I suppose that I shall engage in direct charity.  Find a local family down on their luck and help them out, save their house, pay their water bill, fix their car.

What if you lose your job?  What if a loved one is injured and there are huge medical bills?  The charity money that you gave away could have been used to save your own family.  Charity begins at home and you should think of yourself and your family the next time you’re feeling generous with the excess of your paycheck.

And while I’m on the subject of America - YOU HAVE NO BUSINESS DONATING TO OVERSEAS CHARITIES!  More than 1/3rd of each dollar spent by the American Government this year is borrowed money.  Yes, we’re borrowing money to give to charities (ie foreign governments).  Israel has a high standard of living and less debt than us but we borrowed 1/3rd of the US $4 billion in aid that we gave them this year.  And if you are reading this, you probably have debt of your own.  Home mortgage, car payment, credit cards, etc.  If you send ANY money to charity and you have ANY bills, this means that you borrowed that $ to pay the charity.  If you haven’t paid your house off, your car off, & your credit cards, you’re using borrowed money to fund your charity donations.

We allow our politicians to spend out money on charity countries because we’ve all been sold that it is the noble thing to do.  Perhaps if more Americans were concerned for their own wealth and financial well being, they would insist that Congress do the same with their tax dollars.

What I’m saying isn’t politically correct, but it is correct.  Giving money away when you don’t have enough for yourself is insane.  America is broke and we give away more.  Hard times are coming.  In ten years, you may wish you had given less to charity and saved some for your own family.

Think about it.  Be wise with your money.  Be tight with your money.

The path to riches isn’t easy.  You have to change your way of thinking.

Good luck!

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

Saving

What do you think is the path to riches?  Most people believe that you have to win the lottery, inherit the money or have a super high-paid job like a CEO or celebrity. While having a high paying job makes getting to the million dollar mark easier, it isn’t the only factor.  It isn’t even a necessary factor.

If you earn $40,000 per year, working from age 25 to 65, you will earn $1.2 million dollars in your lifetime.  About two decades ago I was told by a financial planner, “It’s not what you earn.  It’s what you keep.”

Think about that for a minute.  There are plenty of lawyers and dentists who are broke.  They earn $143,000 annually and spend $142,000.  What is left over usually is used to maintain credit card bills and rich living.  If anyone with an income spends less than they earn (after taxes and expenses), they will be able to save money.  Save money and you’ll have it available to invest.  You will have it available when “once in a lifetime” opportunities come up.

Most Americans don’t have 3 months salary in the bank.  You should have a few years worth of salary in the bank.

If you’re thinking of buying a house and the bank approves you for a $250,000 loan.  Buy a $150,000 house instead.

Your car running good?  How about a detail instead of a new car payment.

Instead of going out to the movies and blowing $100 on a family of 4, how about rent some movies and cook some microwave popcorn.

Live within your means!

This is one characteristic that you will find with all self-made millionaires.  THEY LIVE WITHIN THEIR MEANS.

Being frugal makes it easier to live within your means.  But if you are serious about becoming wealthy, you have to change your mindset to a state where saving and accumulating money becomes normal.  You’ll never get rich spending what you take in.  You have to spend much less than you take in and then save and invest.

Becoming a millionaire isn’t easy!  If it was, everyone would be rich.  But if you are serious about becoming a millionaire, you have to start by saving.

More on this topic as this blog evolves.  But if you’ve decided to start on the path to millionaire status, begin to start saving your money.  Track your progress and find ways that you can save more.

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net