Archives for February 2014

Rich Habits Word of the Day

Fortuity – Risk, uncertainty.   Tom understood the fortuity of investing and limited his investment to 25% of his annual savings.

Rich Habits Fact of the Day

I loved the book The Frugal Millionaires: 70 millionaires anonymously share their ideas about money to help each other and you and thought I’d share a bit of it with you. The author starts the book by listing six simple concepts that most of the 70 frugal millionaires in the book have in common. The list:

1. Delayed gratification is easy for them.
2. Resourcefulness in getting what they want is a key to their success.
3. They make living way below their means painless.
4. They don’t like wasting anything (especially money.)
5. Their sense of “self-entitlement” is highly minimized.
6. Spending is OK with them depending on what they are buying.

Rich Habits Lesson of the Day

There are three ways to become financially successful in life:

1. Live Below Your Means (80:20 Rule) or
2. Expand Your Means or
3. Both 1 & 2

Believe it or not, most of the wealthy people in my five year study did not make a lot of money. But they did save a lot of money. They were fortunate. They learned the 80:20 Rule from their parents early in life and it became a habit. The 80:20 Rule requires that you make a habit of saving 20% of your net pay and learning to live off the remaining 80%. You pay yourself first by automatically setting aside 20% of your net pay before you pay one bill. This forces you to live off of the 80% that’s left. Here are some budgeting, spending and savings guidelines to help you accumulate wealth:

1. Don’t spend more than 25% of your monthly net pay on housing. It doesn’t matter if you own or rent. Stick to this 25% rule.
2. Don’t spend more than 15% of your net monthly pay on food.
3. Don’t spend more than 10% of your monthly net pay on entertainment. This includes bars, movies, restaurants etc.
4. Don’t spend more than 5% of your monthly net pay on auto loans and never lease. Leasing is something I call a Poverty Habit. Buy your cars and take good care of them.
5. Don’t spend more than 5% of your net annual pay on vacations.
6. Never gamble. If you’re going to gamble on the lottery, it comes out of your entertainment budget.
7. Stay away from accumulating credit card debt. If you are doing this it means you are living beyond your means and you need to cut back on something.
8. Always invest your savings prudently. Never gamble your savings on get rich quick schemes. There’s no such thing. The power of compounding can grow your savings and make you wealthy. Saving just $250 a month over 40 years will produce $500,362 at a 5% return. Savings and investment are two completely different things. You should never lose money on your savings. Investments represent a portion of your savings you are putting at risk. When you invest you accept the risk that you could lose some or all of that investment.
9. Max out your contributions to the company retirement plan. If the company matches your contributions, great. That’s free money. Always take free money when you can get it.
10. Know what you spend every month. Create a monthly budget and track what you spend. I have a budget template I’d be happy to share with you readers.

Rich Habits Word of the Day

Trenchant – Vigorous, intense.  Tom engaged in trenchant communications with all of his valuable relationships.

Rich Habits Fact of the Day

Warren Buffett once took a course offered by the Dale Carnegie Institute because he perceived himself to be a poor communicator. Since then, his ability to communicate with individuals at all levels of the investment world has significantly contributed to his reputation as the greatest financial genius ever.

Rich Habits Lesson of the Day

Thanks to all of the recent advances in technology, communication has become more efficient. Today’s phones, emails and social media have displaced the art of conversation and now make it possible to communicate thoughts and ideas with a few keystrokes. Carrying on a fifteen minute conversation has become passé. Now you can say what you want to say and move on. While technology has increased our ability to communicate efficiently, the fallout is the loss of effective communication that is only possible with one on one dialogue. If you want to grow the roots to each one of your relationship trees you need to spend more time communicating with them. Here are some strategies:

• Call, don’t text. Have a ten minute phone conversation with your relationships.
• Send personal letters. Instead of an email, send them a personal note.
• Meet your relationships for breakfast, lunch or dinner. Instead of getting together with your friends, family or anyone else who matters to you, on Facebook, arrange a one on one meeting with them.
• Call your relationships on their birthdays or when they experience a “life event” such as a birth, death, promotion, new job etc.

Rich Habits Word of the Day

Modus Vivendi – Process.  Tom’s modus vivendi was to accomplish five things every day that move him closer to realizing his major goals in life.

Rich Habits Fact of the Day

One of Thomas Edison’s major goals in life was to create a system that distributed electricity in major cities.  Edison’s first major power station for the delivery of electricity to diverse customers was in Lower Manhattan on Pearl Street. On Sept. 4, 1882, Edison threw the switch that activated the Pearl Street system. Juice flowed down the wires from six sets of steam-generators.

Rich Habits Lesson of the Day

95% in America eke out a living. They live paycheck to paycheck. Most have very little savings. If you want to accumulate wealth and become financially successful in life, it is not impossible to do. Failure, like success is just a process. The process you are following is revealed by your daily habits. If you have bad daily habits you will fail in life. If you have good daily habits you will succeed. To achieve financial success, you simply need to eliminate one or two old bad daily habits and add one or two new good daily habits. This is how the rich get rich.

Rich Habits Word of the Day

Mastermind – Organized group, team.  Tom’s mastermind group was instrumental in his success.

Rich Habits Fact of the Day

Mastermind groups have been around since the beginning of time:  the founding fathers of the United States were essentially a mastermind group; likewise Jesus and his disciples. The Greek king, Alexander the Great (356-323 BC) had a group of advisors as have most world leaders in history; these groups of advisors can be considered mastermind groups.

You may have heard of Benjamin Franklin’s Junto. (Junto is a Spanish word which means “council.”)  Ben Franklin, an individual committed to self-improvement, in 1727 founded a discussion group called the Junto that evolved into the American Philosophical Association and helped establish the first U.S. lending library as well as an academy that evolved into the University of Pennsylvania. The Junto was essentially a mastermind group.

Andrew Carnegie, one of the most famous leaders of industry of the late 19th and early 20th centuries, and a Scottish immigrant who became the richest man in the world, believed participating in a mastermind group to be an essential ingredient for success.

Rich Habits Lesson of the Day

One of the keys to success for companies like Apple, Goldman Sachs and Ford is the ability to get thousands to work together for one common chief aim, purpose or goal. Napolean Hill likes to call organized effort, the Master Mind. In order for this success principle to work you need at least two individuals who are obsessively dedicated to the same chief aim, purpose or goal. “One for all and all for one” makes organizations take off. Ideally, the more individuals you are able to include in your Master Mind, the better. More means more money, success and wealth. All must share five things: a common Chief Aim, Focus, Persistence, Passion and Patience.

Rich Habits Word of the Day

Concenter – Focus, concentration.  The concenter of Tom’s work was his passion to end poverty and promote the American Dream.

Rich Habits Fact of the Day

Jack Canfield, best known for his blockbuster book series Chicken Soup for the Soul, spent years focusing on gathering inspirational stories for his books. His incredible ability to focus single-mindedly on has made Jack a household name and allowed him to sell 1/2 billion books.

Rich Habits Lesson of the Day

There are two types of focus. Forced Focus is the type of focus that is driven by responsibilities, obligations and  deadlines. It frequently goes by another name – work. Forced Focus only gets you so far in life. It’s shelf life is typically short-term. One or two hours at most, without breaks. But there is another type of focus with a much longer shelf life. One that can last for not hours but years, decades, a lifetime. It’s known as Unforced Focus.

Unforced Focus is like putting your ability to focus on steroids. It is driven by passion, not obligation. Human beings are unique among all species on earth because of one singular thing. We have the ability to turn intangible thoughts into tangible things like bridges, skyscrapers, the Mona Lisa, a song or a book. In a sense, we are all godlike because of our ability to create. Every human has this unique ability to create. It’s hardwired into our DNA. I call this ability to create the God Gene. When we engage in any creative pursuit, we activate our God Gene. When we activate our God Gene we unleash the incredible powers of Unforced Focus. Unforced Focus allows individuals to focus more intently and for longer periods of time when we are in creative mode. It is because of Unforced Focus that we are able to turn dreams into reality. Only when we turn on our God Gene are we able to turn on the switch to Unforced Focus.

Rich Habits Word of the Day

Solecism – Mistake, blunder.  The solecism of his first start-up taught him lessons that eventually made him a millionaire.

Rich Habits Fact of the Day

His first company was Traf-O-Data, the objective of which was ‘to read the raw data from roadway traffic counters and create reports for traffic engineers‘. In this way, the company would optimize traffic and end road congestion.

The company’s product was the Traf-O-Data 8008, a device which could read traffic tapes and process the data. They first tried to sell the processing service to the local County, but their first demo failed because the machine ‘didn’t work’, recalled Gates. His partner, Paul Allen, summarized the experience for exactly what it was:

‘Even though Traf-O-Data wasn’t a roaring success, it was seminal in preparing us to make Microsoft’s first product a couple of years later’

And happily, that’s exactly what they did. They kept on going and Microsoft became the largest personal-computer software company in the world. But it’s still nice to know that even the richest philanthropist in the world can make business blunders.

Rich Habits Lesson of the Day

What continues to make America unique is the ability for anyone to start a business. You don’t need a college education to start a business in America. You just need to know how to read, write and do some simple math. When you start a business you will make many mistakes. In a small business, when you make a mistake, it costs you time and money. Because it costs you time and money, the lessons stick. You learn what not to do. You learn what works. You become your own mentor through the school of hard knocks. The most successful businesses in America were built on a mountain of mistakes. The more successful you are as a business owner, very likely, the more mistakes you made along the way. Starting a business is the great equalizer in America.

Rich Habits Word of the Day

Voracious – Uncontrolled, avid.  Tom became a voracious reader when he discovered that it was a Rich Habit of successful people.

Rich Habits Fact of the Day

Co-founder of Microsoft and tech icon Bill Gates has made no secret of his passion for books. Gates loves to read, and loves to share what he’s reading with others through the Gates Notes Bookshelf, full of book reviews, books he’s read, and books he wants to share with the world. Beyond recommendations, the Bill & Melinda Gates Foundation has made it a mission to bring and keep more useful technology in U.S. libraries and even libraries around the world. On a more personal level, the Gates home stands as a testament to his love of reading, with a 2,100 square foot private library, complete with a domed reading room, and a Leonardo da Vinci notebook valued at nearly $31 million.

Rich Habits Lesson of the Day

ALL successful people were mentored. Some were mentored by their parents, others by teachers and still others by someone who took them under their wing at work. When you find a mentor it is as if someone just deposited $4 million into your bank account. It’s that valuable. But not every successful person has a real-life mentor. Some have no choice  but to find their mentors in books. Books can actually be your mentors in life. Biographies of successful people, self-help books, success books, history books and how to books can take the place of real life mentors. They can lead you down the right path in life, inspire you, motivate you and educate you just like any parent, teacher or career-mentor can. Spending 20-30 minutes a day reading these types of books will open your eyes and pave the road for you in life.