Tag: PF

How to Live Like a Millionaire


Many would love to live the millionaire lifestyle.  Spending each day at the beach, on the golf course, or in exotic resorts around the world.  Each night would be parties and galas.  Perhaps a random trip to the office to check on things and grab some cash from the safe.

Sadly, that is not the normal lifestyle of the typical millionaire.  As chronicled in The Millionaire Next Door, the flashy lifestyles seen are those of people who have a large income, but probably would be on the streets within six months of losing that income.  Most millionaires work a lot harder than most other people.  They forego a flashy lifestyle, instead saving religiously and judiciously buying things that will increase in value rather than drop.

(Never read The Millionaire Next Door?  It is a must for anyone wanting to actually become a millionaire.)

Millionaires could afford to buy new cars every few years, but they choose not to because they know they are a wasting asset.  Likewise they could buy big, flashy mansions in new subdivisions, but instead they chose to buy modest houses in older neighborhoods since they cost less to maintain and the rate of appreciation for the neighborhood can be judged from its history.  Whenever they make a big purchase, it is something that will grow in value such as fine furniture, works of art, or properties.  They minimize the amount of money they put into things that go down in value (such as cars).Millionaires also tend to own their own businesses.  It is much easier to become wealthy when doing something that allows each of your hours spent at work to be multiplied.  For example, if you work for someone, you may get paid $30 per hour.  You can earn more by working more hours, but you still only get $30 per hour.   If you work for yourself and use the time to design and market a product, you can get paid each time someone then buys the product.  If you write a novel, you get paid each time someone buys a copy of the novel.  If you own a movie theater, you get paid more if more customers attend the movies and buy popcorn.

Having people working for you also multiplies your time since for each hour you spend supervising, several other people are working to increase the money your business earns.  If you hire effective people and manage well (eventually hiring other effective managers), the more people who work for you the more money you can make for each hour of your time.  Note that even doctors and lawyers don’t make a lot of money because of their salaries.  They make a lot of money because most of them own a practice or are partners in a law firm with people working under them.   They are business owners.

      

So, if you wish to become a millionaire, here are some tips:

1) Spend less than you make, and religiously put money away into assets – things that grow in value and eventually provide an income.  Note that investing in your own business can be an asset.

2) Start your own business, or find something to do that multiplies the value of your time.  This is a tough step for many to take and requires a certain type of personality, but it definitely makes becoming rich a lot easier.

3) Cut down on expenses and payments as much as possible – it is easier to invest and save if you do not have every dollar spoken for before you earn it.

4) Live below your means.  Have a smaller house, older cars, and take less exotic vacations than your level of wealth and income will allow.

5) Make smart purchasing choices.  Bring in drinks from home rather than hitting the vending machine every day.  Bring a lunch in rather than eating out all the time.   When you do eat out, have a water and save $2.50 plus taxes per meal.

(Save money by bringing your own water bottle and skipping the vending machines. Shown: CamelBak Eddy Water Bottle, 0.75-Liter, Cardinal.)

6) Plan your success.  Don’t simply hope your investments will grow.  Make a budget, plan how much you will invest each month, then stick to that plan.  Good luck generally comes to those who have set themselves up for success.

7) Work hard.  Whether you own your own business or work for someone else, you can plan on working harder than most other people if you want to become wealthy.  Additional money earned generally is available for investments since other expenses have been taken care of.

8.) Hire people to perform tasks you are not skilled at doing.  Most millionaires would not work on their own cars, repair their own sinks, or cut their own grass unless it was a leisure activity for them.   Millionaires would rather spend the time doing what they do best or with their families than doing tasks that they can hire someone to do who will do a better, faster job.  If you will take 8 hours to fix a sink and could make $400 in those eight hours at work, it makes sense to hire a plumber at $150 and instead work the extra hours.  Even if it only takes him 1 hour because of his experience and tools, you come out ahead.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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The Conservative’s Welfare Plan


Let’s face it – welfare just isn’t working.  There is a lot of money being spent, but a lot of it is being wasted, to the point that kids are showing up at school hungry despite all of the food assistance money being sent to their households.  The issue is the same one that is always seen when you try to run something through central planning – those setting up the program don’t have the ability or the time to customize it for every person or region, so they create something that really doesn’t work for everyone.  In addition, the power created through centralization leads to fraud and abuse.  We need a better way to do welfare.

 

Some people are incapable of taking care of themselves and therefore need to be handed food, clothing, shelter, etc….  Others could take care of themselves but choose to game the system instead, taking resources from those who really need help (for example, those who abuse Medicaid to abuse prescription pain medications, making it more difficult for those who need the medications to get treatment) .  Rather than a check in the mail or an Obamaphone, many people really need a firm but caring “no” and perhaps an offer of something like a job or job training to get them back on track and being productive (and happier in the long run).  Some parents are struggling and sacrificing for their children and just need a little help to make ends meet, but others just ignore the children and spend all of the money on themselves.  Others have addictions, where giving them money just helps buy the next shot of heroin or fifth of whiskey.  A centralized program, with an army of government workers who quickly have any desire to change the system beaten out of them, gives you what we have:  fraud, waste, abuse, and a lot of hoops for those who really need help to jump through.

              

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The Conservative’s welfare program would rely on free-enterprise.   There would be a plethora of well-funded local groups that provide food, shelter, job training, and other assistance to those in need.  Because they were local, they could learn who really needs help and what kind of help is needed, be it a sandwich or a connection to a next job.  These groups would compete for donations by showing the good works they were doing.  Those who were effective at meeting needs would grow and receive more donations.  Those who were wasteful and ineffective would go out-of-business.  People could decide what was needed and direct their donations there.  If something got over-funded, to the point people for the charity were building palatial offices, people would donate somewhere else.

The issue with going to such a system is converting from what we have now.  Because people are already having a good portion of their tax dollars, on the order of 50%, going to welfare, it would be difficult for them to give additional money to charities (although a lot of them do).  It is also difficult to eliminate existing programs in order to cut taxes to allow for more private giving because there are always tragic cases for those that want to keep the power in Washington to parade in front of the cameras.  Luckily, there is a simple solution, and it would require very little effort.


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Here’s the plan:

Allow individuals to deduct their contributions to charities that provide services that replace government programs (food, shelter, job training, clothing, health care, etc…) directly from their taxes, dollar-for-dollar, up to 10% of their income.  Then, as the needs in different areas are met by private charities, discontinue the government programs, keeping them in place in areas where the needs are not met. 

Here’s why this would work:  

Right now, individuals are taxed, their money taken to Washington.  Washington bureaucrats making high six-figure incomes then hire an army of civil servants making high five-figure incomes to disperse the money they collect to programs such as food stamps and section-8 housing/HUD.  A lot of the money collected is lost in the process, plus the money is not distributed efficiently, resulting in bad results and/or an enormous cost.

By allowing individuals to give the money directly, which they would do if given the choice of giving it to causes they believe in or sending it off to Washington, groups that meet the needs of the poor and disadvantaged would be funded.  Because more money would be available, more groups would be developed and compete for funding by trying to do the most good at the least cost.  By limiting the amount that could be given, there would still be funding for things like Defense and essential government processes.

Advantages:

  • There would be more money available for the needy since there would be less waste.  Wasteful charities would change their ways or go out-of-business as more efficient competitors emerged.
  • People would be helped locally, meaning the charities would be designed to meet their needs, rather than some global need.  We’d see things like families being provided directly with food that met their dietary requirements rather than a check being sent to the home that gets spent on cigarettes and lottery tickets.
  • There would be enough different groups and people working within those groups to determine how to best meet the needs of those around them and actually improve society.  Imagine the minds who create things like the smart phone and FaceBook working on addressing the needs of society!
  • Needs currently not being met would be addressed as individuals looked for new charities to start once the space for things like food and housing became crowded.  Maybe there would be groups who drive people to job interviews or help those who are victims of crime right after they are robbed or assaulted.
  • Taxes could be lowered as needs were addressed more efficiently.
  • Those who are able to take care of themselves would be transitioned into productive members of society with an income, which in turn would further reduce the burden on those currently paying for welfare.  It would also bring pride back to people, which could change futures and neighborhoods.
  • Payers would feel good about their donations rather than feeling bad about needing to pay taxes.  There might be less tax-cheating.


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So in the end, we would all pay less in taxes, there would be more people working and producing things, which would make society wealthier, people would be seeing their needs met more efficiently and with less red-tape, and we would end the cycle of poverty, bringing pride to individuals.  If this sounds good, forward a link to this post to a friend or your FaceBook page.  Then, write your Congressman and your local newspaper.  We can make society better if we all work together for change.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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Finding the Right Stocks to Invest in


When I wrote and published the SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, I covered a lot of the information on how to invest, including what the different types of assets are (stocks, bonds, mutual funds, warrants, LEAPs, REITs, and options) and what the risks are when you purchase these assets.  It also covers how to use investing, along with management of your money from work, to grow wealthy and have a good chance of becoming financially independent by the time you are in your mid to late forties, assuming that you start right out of college (or even in high school).


 

A question I would often get, however, is:

How do I find stocks to invest in?

To answer that question, let’s take a look at the type of company that you want to invest in, assuming you’re following the advice in  the SmallIvy Book of Investing: Book1: Investing to Grow Wealthy and buying great companies and planning to hold them for a long time.  If you’re instead planning to trade stocks – trying to time the market or find stocks to hold for a short period of time – I wish you the best of luck, because I think you’ll need it.  After several years of trying to do the same thing, I learned that I would have gotten a better return just investing in index mutual funds.  (See, for example, Bogle On Mutual Funds: New Perspectives For The Intelligent Investor (Wiley Investment Classics) to learn about this very sound investing method).  The way to have a chance to outperform the markets with individual stocks is to find great, growing companies and then plan on holding them of a long time, through good times and bad.

If the Loveless Cafe, near Nashville, TN were a publicly traded company, that would be the kind of stock you would want to own.  They have a top-quality product (fantastic southern food in a unique atmosphere) with few real competitors in the area.  They are fortunate in that a lot of people think they can cook and open southern-style restaurants, but most of them can’t cook.  Those who become chefs end up cooking fancier fare and also tend to open places in the bigger cities rather than out in the country, and therefore don’t compete. For more information on The Loveless Cafe, check out Meet Me at the Loveless or one of the other books below (just click on the image).

Part of the charm of the place is the location – it is just on the side of the road in what used to be a motel.  It is close enough to Nashville that people visiting the Music City can head out there for dinner after a day shopping and seeing the sites in Nashville, but it is remote enough to be memorable.  The remoteness also helps in that if you want a snack or a drink while you’re there, you almost need to pay the high prices they charge in the stores surrounding the restaurant since they have an effective monopoly.  (In actuality, there is a gas station with a store right next door, but they keep it hidden from sight on the property with hedges and such – smart.)  Having a lot of available free parking, to me at least, also is a draw.

More than just being a country diner, The Loveless Cafe is a name and a destination.  They can sell shirts, bags, and hoodies with their logo plastered across the front and people will pay high prices to buy them.  Think about that – owning a business where people from all over the world will pay you to advertise for you!  Few other restaurants have been able to accomplish this feat  Some examples include The Hard Rock Cafes, Planet Hollywood, and Joe’s Crab Shack.  There are other restaurants that are successful, but no one is going to pay to wear their logo.  In fact, most people probably wouldn’t wear something with their logo even if it were given to them.  Would you wear a shirt advertising Red Lobster, The Olive Garden, or Outback Steakhouse?  These are all great restaurants, but they are not destinations and tourist attractions in their own right.

As it stands today, The Loveless Cafe would not be a good investment as a SmallIvy, grow wealthy over time through growth, stock.  It would be a great income investment since I’m sure that the restaurant generates a ton of cash each year.  Even though their prices are very reasonable in the restaurant (not so much in the gift shops surrounding the restaurant), they pack people in every night from opening to closing.  The issue is that they currently don’t seem to have a plan to grow – they are happy just doing what they are doing in one location.  A great growth stock requires that the profit the make each year increases – not just that they do a lot of business.

The amount of income you produce is proportional to the number of people who you serve.  If the Loveless Cafe were to be sold to a family or a corporation who desired to expand operations, opening additional locations and also expanding the lines of products they sell directly to consumers off-of-the-web, they would then be instantly transformed into a great growth company.  So that is what you need to look for when selecting a company:

  1.  Find a great brand with few real competitions, at least in the same class of the company.
  2. Make sure the company has the ability to expand.
  3. Make sure that the company has good management. (Just look at their track record.  If they have had the ability to steadily grow the business each year while taking on a reasonable amount of debt, if any, they are good managers.)

Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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