Mona and Al, wife and husband, cousins of mine, had a years long habit of buying one lottery ticket every week just for the fun of it. You know, the government sponsored buy-a-ticket-for-a-dollar-and-win-five-million kind of lottery. When they were in their 60s, they lucked into the winning number and became overnight millionaires.
They were an odd lot, these cousins. I mean, you know how they celebrated their jackpot?
- First off they gave some of the money to their two adult children because they wanted to share their good fortune.
- Second, a generous whack of dough was contributed to a trust fund for the eventual benefit of their several grandchildren.
- Next, they splurged, inviting the entire extended family on an all expenses paid two-week cruise to Mexico.
- Finally, here’s the real kicker, they didn’t buy anything for themselves! Instead, they parked the balance of their winnings in an investment account, purchasing low risk, high rated government bonds.
Socio-economically speaking, the cousins ranked somewhere in the middle class prior to their sudden windfall. But after adding up their newly acquired pot of gold, the Folks-Responsible-For-Counting-And-Ranking would easily slot them into the upper crust.
Upper crust huh? That’s not how Mona and Al saw themselves. Forget about the money. These two knew exactly who they were and had no intention of changing.
Big Spender: ‘Come on! With all that cash staring them in the face? What about buying a new home, a bigger house in an upscale neighborhood?’
You know what the cousins would say to that question? Why? Why should they buy a new house? As far as Mona and Al were concerned, there was no reason to leave the modest, comfortable 1600 square foot home where they had lived for thirty-two years, raised their children, become part of the fabric of the neighborhood.
Big Spender: ‘Hmmm. How about a new car, one of those turn-your-head-sexy-oh-my-good-buddha-I-have-to-feel-it-touch-it-smell-it-luxury models with leather seats and the latest technology?’
Nope. Their seven-year old sedan was operating well so why would they even consider trading it in for a shiny new model?
Big Spender: ‘I don’t get it! What’s the point of having money if you aren’t going to spend it?’
Imagine: being utterly content with your self and your personal relationships; grateful for the people in your life; satisfied with all the stuff you have, and not wanting more. This is what we here at BuddhaMoney like to refer to as Fulfillment.
Because you are fulfilled, the handsome seven-figure check you’re handed doesn’t make you salivate like Pavlov’s dog; and there is no craving to buy expensive stuff in an attempt to plug emotional holes. Instead, thoughts are directed toward those you love, and how you’ve been given the opportunity to enrich their lives with your generosity. And when generosity is expressed, you and those who receive your gifts all become wealthier.
Win the Lottery, Enjoy Financial Freedom … Until You Don’t
Mona and Al, two people who had their feet on the ground, head on straight, and understood what’s important in life.
Unfortunately, most lottery winners don’t fare so well. In fact, within five years of acquiring overnight riches, more than 70% of lottery winners, whether they’ve won one million or fifty million, lose ALL the money. And by ‘lose’, I mean spend and have nothing to show for it, no assets with any value, after five years.
But this little publicized statistic doesn’t stop billions of dollars being wasted on lottery tickets every year in North America. Wayyyy too many folks looking to land on the fast road to financial freedom despite the fantastic odds against winning.
Ah yes … the odds? Depending on the lottery, and how many people buy tickets, the odds average out to about 1 in 15 million! Those odds don’t qualify as a long shot or a moon shot; they’re more like a one-handed-blindfolded-behind-the-back-alley-oop-feet-stuck-in-clay-out-of-this-universe-shot. You want better perspective? Look at it this way: you’re more likely to be struck by lightning during your lifetime than you are to win the lottery.
If this is your plan, you won’t just need luck, you’ll need divine intervention. And the last time I checked, the gods aren’t terribly concerned with Earthly matters such as monetary wealth.
So, because hope isn’t a strategy, consider working out a Plan B. Like, oh, I don’t know, how about veering off to the slow lane? In other words, making the effort to learn how to save and invest so that in say, twenty years time, you’ll be the proud owner of a seven figure account balance, with financial freedom at your door step.
And that financial freedom will last the rest of your life. Because when it isn’t handed to you, when you work for it, when you know the sweat and tears and long hours and sacrifices and compromises you’ve made for the purpose of making your dreams come true, you tend to value your money. Rather than becoming a suspender snapping, cigar chomping big spender eagerly searching for ways to lose your money, you look for smart ways to save and invest and contribute to community. All of which leads to peace of mind, balance, and Mona /Al type life Fulfillment.
The Way of The Tortoise
Slow, steady, patient, self-disciplined, focused, this is the way of the tortoise who wins the race. There’s no magic, there’s no secret formula, but there are some key ingredients to building lasting wealth.
Sure, you’ve heard it a thousand times … put aside money for savings. Still, here I am repeating what others before me have said. Save your money. Make saving a habit. Because once you do so, you’re half way to becoming wealthy.
I like to think of savings as a debt I owe to myself. Meaning, every month I pay myself a certain amount. Just like I pay the monthly phone bill, I pay myself. And to reinforce the habit, I make it automatic by setting up a recurring transfer every month from my checking account into my savings account.
Our brains need this kind of help; when we don’t see the money in our checking account, when it’s not readily available, we’re less tempted to spend it.
How much you save is your decision. Of course, consider your income and expenses. Then, rather than paying yourself a dollar figure each month, pay yourself a percentage of your discretionary income, such as 10%.
And once you commit, stick with it! No creative rationalizing (i.e., but I really need to drop five grand on a vacation to Mexico and I swear I’ll make up the lost savings soon), no inventive, trivial justifications (i.e., it was a once in a lifetime sale and, really, the more I spent, the more I saved). Stay disciplined. Stay the course. Become wealthy.
- Frugal Mindset
The less our expenses, the more frugal we are, the higher our savings and investments, and the larger our nest egg grows.
That said, we here at BuddhaMoney believe in a balanced approach to building wealth, a path of moderation, the Middle Way. So, sure, be frugal, but don’t let saving money dictate your every move.
If you occasionally spend over budget, and it takes you another six months, year, or two years to achieve your financial goals, but you’re getting the most out of life’s ride, well then good for you. Because while setting financial targets helps us to achieve our goals, and reaching those targets feels good, you’re missing out on life if money is your sole focus.
Here’s what’s downright silly and damaging to your self and your path to wealth: indulging your ego with Must-Have-Brand-Names, or thinking you are impressing others with toys and trinkets. What matters is growing your assets and getting your self into a position where you may live life without money headaches, and with peace of mind.
Let me ask you this: do you know where you spend your money? Most of us don’t. But guess what? Wealthy people do. So how about you play a game with yourself: keep track of every purchase you make for the next month, both big and small. This will provide an excellent snapshot of your spending habits, and allow you to make changes beneficial to your pocketbook, investment earnings, and future financial freedom.
Once you’ve fully funded a rainy day account, your savings absolutely has to be placed in an investment account. Because this is where your money goes to work (bank savings accounts earn minimal, if any, interest), and this is how you move forward on your path to financial freedom. And if you want to pick up the pace on your path, then set up automatic, once a month transfers from savings to investment account.
If you’re a Do-It-Yourself (DIY) investor, keep investment related fees to a minimum by using a discount brokerage. For those just starting out, or who have uncomplicated investment needs, open an account with a Robo-Advisor. If you’re not the DIY type and have a complex portfolio, then consider hiring a Financial Advisor.
As for what to invest in? When you’re investing for the long term, Passive Index Funds (link) are the way to go. When compared to Actively Managed Mutual Funds, not only will fees be much lower but performance is likely to be better: research supports the finding that Index Funds typically outperform Managed Funds.
- Say No to Credit Card Debt
If you can’t afford to pay the balance in full each month, then don’t make the purchase. If you carry credit card debt, you’ll be paying exorbitant interest charges on the unpaid balance, simply tossing money away, and putting financial freedom further out of reach.
- Limit What You Borrow
Here’s the thing: debt sucks. If you do not have to borrow then don’t. And if a loan is, in your estimation, necessary, then borrow the absolute minimum only after you have drafted a detailed plan to pay back the borrowed funds.
Because debt payments stop you from moving toward financial freedom, and 10 out of 10 honest financial planners agree that debt is the cause of stress, headache and general dissatisfaction. Who needs that? You don’t.
So when you’re buying a house, and the bank or mortgage lender is willing to lend you a gazillion dollars, do not be impressed by their willingness to throw money at you. Do not buy more house then you need simply because you think you can.
Because when you have a mortgage, guess who owns the house? Not you. The lender. And if you take that gazillion dollar loan, and are unable to make the mortgage payments, well then, guess who gets to toss you from your home? That’s right, your friendly neighborhood lender.
- Be Patient
People who become wealthy and STAY wealthy, have a long term perspective, do not act impulsively, or adopt harmful spending habits that damages their financial freedom plan. They set weekly, monthly and annual goals for them self, they remain patient, knowing their dreams need not be achieved today, and they keep the big picture in focus, i.e., achieving financial freedom.
To be patient means to trust in nature, trust in your self that life will be better every day. Whatever happens, your patience finds something good for you. Because interpreting life is a matter of perspective. There are those who see thorns on a rose bush, and those who see only the rose. So be grateful for all that you are, and all that you have today, and trust that the path you choose will eventually lead to your goals.
The Meaning of Wealth
Warren Buffet, the second wealthiest person in the world coming in at a hefty $72B (USD), does not measure success by dollars. In 2016, he donated $2.84 Billion to charity. To date, he has given away more than $21 Billion. And when his number is called, he has pledged to give away 99% of his wealth.
He’s a guy who just goes about his business, getting the job done, and loving what he does.
Balanced and emotionally fulfilled, he doesn’t need to prop up his ego by plastering his name on sports stadiums, hospitals, universities or any other buildings. Here’s what he has to say about those who demand their name on a building in exchange for a chunk of money:
“I know people who have a lot of money and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age (i.e., 86), you’ll measure your success in life by how many of the people you want to have love you, actually do love you. That’s the ultimate test of how you’ve lived your life.”
I’m guessing that Warren would have gotten along quite well with Mona and Al.
Books To Learn From
For those who want to learn more about stepping on the path toward building wealth, here’s some worthwhile guidance:
Think and Grow Rich, Napoleon Hill
Rich Dad Poor Dad, Robert Kiyosaki
Women and Money: Owning the Power to Control Your Destiny, Suzy Orman
Millionaire Next Door, Thomas Stanley and William Danko