Knight Kiplinger, editor in chief of Kiplinger’s Personal Finance Magazine, was leading a personal finance seminar at a high school when he posed this question to the teens: “When you see a man cruise by in his $65,000 BMW 550i, what do you assume about him?” The answer: “He’s rich.” And a man who drives by in a ten year old Chevy? “He’s struggling.”
Elusive realities. Just the answers he was looking for. They provided a launching pad for a lively discussion of deceptive appearances and realities.
By the end of the seminar, these teens had a clearer sense of how little you can determine about wealth from a person’s visible consumption. The BMW, he noted, is probably leased, so we can infer only that the driver earns enough to handle a $1,131 monthly lease payment. We know nothing about his net worth, which may be great … or may be almost nonexistent.
The message in all this: The biggest barrier to becoming rich is living like you’re rich before you are. Why? Because all that discretionary spending (the chic apartment, frequent travel and restaurant meals, consumer electronics, fancy clothes and cars) crowds out the saving that will enable you to be rich someday.
“I often hear complaints from young adults, twentysomethings to those in their early thirties, that they’ll never be able to buy a home because they can’t afford the down payment. But when I probe them about their budgets, I find that they earn enough to make a down payment in just three or four years if they cut back on their spending, and if their starter-home expectations are reasonable,” says Kiplinger.
Know who grasps this best in American society today? Recent immigrants, whether they’re from Latin America, Africa, Asia or
What do they do with their savings? They buy a home, often in a less desirable neighbourhood that other strivers are leaving behind. They fix it up, rent rooms to friends and relatives, and then trade up to a nicer home. They may keep their first and second homes as rental properties, becoming hands-on landlords.
They don’t look or act rich, and they often need translation help. Many of them arrived in the
Some day, when they finally feel as financially secure as they will actually be, they might start living it up. They might buy (not lease) a BMW, most likely a used model. High school kids will assume them to be rich and cast admiring glances at them and their fancy cars. But just like overspending, the habit of frugality is hard to break. Maybe these folks will just keep the old Chevy. They will remain proud members of the Invisible Rich, a growing army of super savers whose net worth is more impressive than their income. They’d rather live within their means, sleep well and forgo the covetous attention of their fellow citizens. Not a bad way to live at all.
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A System Everyone Can Use
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Whether you think you can, or think you can’t, you’re absolutely right. The novel and the movie “The Da Vinci code” has brought this fascinating individual to the forefront in recent years. We can learn a great deal from Leonardo Da Vinci as well as others who have gone before us.
Just like the young learn to survive by following and imitating their parents, a key component to being successful is to imitate successful people. Humans, unlike any other species, can choose whom they would like to imitate. Leonardo Da Vinci felt that throughout our lives, and all of its stages, we should learn to consciously choose role models and to replace the ones we outgrow.
By doing this you will begin a positive adventure toward your worthy goal. For example, if you want to become a better trader, study the great traders, Jesse Livermore, Paul Tudor Jones, and Victor Sperandeo, to name a few. Read what they have written and what is written about them. Study their habits and imitate them.
If you want to become a leader, study Abraham Lincoln (he never quit) or Winston Churchill. What’s most fascinating is the fact that Da Vinci had a “system” he invented and followed religiously every time he began a new idea. It’s a very simple system you can use to help you achieve your goals. Da Vinci called it the “Smart System”, S M A R T, being an acronym for:
S – Specific: Define exactly what you want.
M – Measurable: Figure out how you’re going to measure your goals.
A – Accountability: Commit to being personally responsible for achieving your goals. If part of a team, be sure that accountability is clear.
R – Realistic/Relevant: Set goals that are ambitious but achievable. Make certain your goals are relevant to your purpose.
T – Timeline: Set a clear time line for the achievement of your goals.
Great plan, wonderful system, easy word, “SMART”.
