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What a difference a year makes…
Looking back at my last year’s Holiday article called 2008 “The year of quicksand”; I made several references to the rip-saw in the economy and the plummet of almost every known economic indicator. Some pundits were even speaking of an “economic Armageddon”.
Everything is still not back to the "before" - with the then ever-climbing housing prices, stock portfolios and real unemployment near zero. Perhaps it never will be - and perhaps it should have never been in the first place.
Almost everyone, it seems, has had to take a long, hard and honest look at their situation and assess their life’s path – where they were and how they had gotten to their particular present circumstance. The vast majority of people were largely unaffected, with the exception of the precipitous drop in the value of their portfolios which are not realized until the security is sold. However, even they felt the need to perform some “risk management” so that they could better manage should they become affected as well.
One of the best books that I ever read that deals with personal finance is “The Millionaire Next Door”, by Dr. Thomas J. Stanley. Throughout the book, Dr. Stanley goes to great length in describing how to build real wealth – incrementally and over time. He speaks of the disciplines of modesty, living below your means, and diligent savings.
For years I have practiced these principles. My “new” vehicles are always non-descript and used – usually only a year or two old and with less than 20,000 miles on them (always get a “Carfax”). I took a 15 year mortgage on my home instead of the normal 30 years – and even then, I made sure to purchase a house that was significantly less than the amount of the loan for which I could qualify. I made sure to sock-away cash, max-out my IRA contributions and invest prudently (even though I saw my values decline like everyone else – then rebound because I did not take flight).
You see, money does not buy you happiness. Freedom buys you happiness – freedom from fear, freedom from true need, and freedom to seek new opportunity.
A few years ago, a dear friend of mine – who is an advocate for the cause of women everywhere – wanted to join me on one of my annual trips to
She discussed with me several of her ideas – education, information technology, various lifestyle changes and the like. After listening for a while, I told her that she should concentrate her efforts on building wells for a reliable source of drinking water – as this would best help her quest to liberate. She could not quite grasp why this might make such a significant impact.
“Simple”, I said. “Building a well in the village will give the women up to five free hours a day.” I went on to explain that the women in impoverished villages have to walk miles every day, jugs in hand, to a source of reasonably good water and return fully laden. This one task can take up to five hours per day to complete – not to mention the additional time required of them to take care of the sick that were made ill by unclean sources of water.
The same goes with us “civilized” folks…
As a result of the economic correction, I now know as many “poor rich people” as I know those who are used to the daily struggles of life. They bought the fancy and expensive homes and cars. They surrounded themselves with baubles and other things. And in the end, they were living paycheck to paycheck like so many other less-affluent souls.
So as we climb out of our individual economic crisis, let’s learn from the past and vow not to repeat it.
- Buy a home you can afford. No more than 75% of what you can “qualify”.
- Buy used vehicles – a year or two old and with low miles. Make sure you take out a loan for a term that does not exceed the life-expectancy of the vehicle so that you don’t end-up “upside down” when it comes time to get another one.
- Maximize the amount you can put into your retirement account. If you can’t do this, then your own economic budget is out of balance.
- For God’s sake, don’t carry a balance on your credit cards. Paying off this balance is better than any other investment you can make. With credit card interest rates at 18% or more (in some cases, much more), your “return on investment” by paying-off your credit cards is guaranteed and almost certainly more than you can earn elsewhere.
- Build an emergency fund of at least six-months. Again, if you can’t do this, then your own personal budget is out of balance.
- Build your savings – build your wealth. Save what you can balancing it with “living for today”. Don’t be a miser who expects to suffer your entire life for “living it up” at retirement. I know too many people who passed soon after they retired – and their heirs “lived it up”.
o Be wary of the advice of your “financial advisor”. For instance, in February of 2009, my advisor called me and suggested that I get into some more “conservative” positions. My response was, “Dude! The time for this conversation was when the DOW was at 14,000 last May, or in September when it was sliding. Now that it has plummeted to this level, it can only go up!” Buying high and selling low – following the herd is never a strategy for investing.
- Make sure you have the proper insurances. As appropriate:
o life insurance (preferably term-life) to ensure your family is protected should you pass;
o more importantly, disability insurance to protect both you and your family should you become disabled;
o perhaps consider long-term care insurance.
- Seek quality over quantity. How many of us purchase toys for our children that are broken before the New Year. Hess trucks are still one of the best deals around. Even household goods and clothing – make sure they are of a quality that will last. Change your perspective from one where things are “disposable” to one where things shall become “heirlooms”.
I know that many reading this may be thinking, “The arrogant b@stard. Easy for him to say.” Yes, it is far easier to say than to do. But each of us must define our modest and achievable goals in life, formulate a plan to achieve these goals and set about doing it. If you surpass the goals you set for yourself, then it’s a bonus and you will undoubtedly enjoy it even more.
As for me, it has taken 25 years to get to where I am – I consider myself “comfortable” and not “rich” in the monetary sense. However, I do consider myself very wealthy indeed in family, career, friendship, travel and life-experiences… And I am fortunate to have the freedom to enjoy them.
We must endeavor to live comfortable, but below our means so that we can better manage when faced with the inevitable adversity. We must understand and believe that there is no “get rich quick” scheme – that we must each rely upon ourselves to realize our goals. We must become more responsible for our actions and refrain from “blaming” others – after all, nobody forced any of us to make the decisions to become indebted that we have made.
We must become more self-reliant so as to not be a burden or beholden to others. There will be no government bailout for us – nor should there be. A helping hand to get us over the roughest of patches should be the role of government in society. But to become reliant on government, family, or friends is to relinquish control of our potential and – ultimately – our freedom.
We must seek the “Tao” – the way – a balance in our lives, one that will lead us to our freedom and our true happiness.
And so as we come to the end of another year. We find ourselves reflective of the year’s hard fought battles, won and lost; of loves arrived and departed, and of business successes and disappointments.
With rebuilding spirit, we look with great anticipation to what lay before us in the coming year.
Most importantly, we look to reconnect over the next few weeks with our families and closest friends.
I do hope that you have enjoyed our monthly eNewsletters as much as we have enjoyed producing them and that you have gained from investing your time in reading them. It has been a great pleasure to be a part of your lives and I thank you all for your time, consideration and support over the years.
It has been a great pleasure to know you, or to work with you, or to write for you this past year. So, as the Irish cheer goes…
“May the best of your 2009 be the worst of your 2010.”
Joseph F Paris Jr is a champion of Operational Excellence (Lean Six-Sigma and Leadership). He has devoted himself to increasing shareholder-value for all of his clients and constituents through his twenty plus years as an entrepreneur, academic and professional instructor, and strategic consultant. As President of XONITEK Corporation, Mr. Paris has established a consultancy firm with a worldwide footprint and reputation of success. Mr. Paris specializes in the disciplines of: lean, six sigma, finance, turnaround management, operational due-diligence, supply-chain, logistics, and manufacturing.
Contact him at parisjf@xonitek.com.
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