Is The Key To Wealth Found In A Book?

Personal Finance BooksI often scan the business and finance section at our bookstore for new book covers. Virtually every week, I find new titles. Row upon row of money books. How many ways can money be discussed? Which one holds the key to wealth and financial freedom? More importantly:

If the answer to wealth is revealed between the covers of the books proliferating in bookstores, why aren’t more people wealthy?

Take my mom, for instance. Despite her intelligence, upper-grad college education and vibrant energy, she struggled financially her entire life. She passed away a few years ago, penniless.

My mom was an avid reader. My inheritance consisted of boxes filled with books — including a large assortment on the topic of personal finance. If the cure to her financial woes was sitting on her bookshelf, why didn’t her money life thrive?

I am convinced that achieving wealth and financial freedom takes more than understanding how to make, save and invest money. Becoming wealthy is the product of factors more fundamental — and complex — than math.

I really didn’t do anything extraordinary to become a millionaire. No grand inventions, no Fortune 500 company, no big paychecks. I applied basic money principles and they worked. I ask myself, why did I apply these principles, but not my mom? What does it take?  Why have I achieved financial freedom while others have not?

While I do have a few explanatory thoughts, I struggle to answer this question succinctly.

I’ve been told more than a few times that I appear to think differently than the crowd. Is the key to my personal and financial success in these five words?

When I was 30, I told my husband, friends and family that I wanted to be financially free by forty.

“Yeah, yeah, and who doesn’t? Best of luck with that!”, they replied.

Undeterred, I studied money books and personal finance web sites and drafted a lifetime financial plan. When I shared my plan with my husband, he remarked skeptically, “If it’s that easy, why isn’t everyone doing it?”

My response to him was:

  1. they don’t know how to do it,
  2. they aren’t aware of the possibilities,
  3. they don’t want it bad enough, and/or
  4. they haven’t made the choice to do what it takes.

Today, I’d add two more reasons:

  1. they don’t have (or haven’t developed) the capacity to delay gratification, and/or
  2. they believe their personal life circumstances prohibit it.

What are the key factors that help you? Hinder you? Do the reasons I’ve outlined above speak to you? Why or why not? Please share your insights and experiences in the comments.

In my next post, I’ll share the very specific factors that I attribute to my own personal finance success.

photo credit: gaspi *your guide

Why We Need To Exercise Both Sides of Our Brain for Optimal Success

There is a common misconception that most people are either right-brained (creative, intuitive) OR left-brained (logical, analytical). But this isn’t true. We are born with two brain hemispheres. It’s just that our society tends to place a higher value on left-brain skills such as language, logic and math. Unfortunately, this left-brained focus can squash our creative, right-brained attributes and limit our success in life.

Experiments show that most children are highly creative (a right brain function) before entering school. But only ten percent of these same children rank highly creative by age seven. By the time we are adults, high creativity remains in only two percent of the population.

What a shame.

We require BOTH brain functions to optimally succeed. It’s not an either/or thing. Take Albert Einstein for example: most would assume that Einstein was genius because of his left-brained reasoning. However, an examination of his notebooks finds that he credited his greatest scientific insights not to left-brained logic, but to his right-brained creative daydreaming instead.

How can we innovate enough new products or services and create enough new startups to achieve economic expansion if our society, our schools, continue to curb our imagination and punish our daydreaming? Creativity is the fuel that the left-brain needs to power the necessary actions. The right brain gives us the “why” and the left brain gives us the “how.”

Those who cease to daydream can’t see opportunities even when they’re right in front of their nose. You’ve heard me say this before and I’ll repeat it again: Big changes start with a thought, not an action.

Take a look at the following list of brain functions. Can you see how success is limited when only 50% of our brain gets regular exercise?

Left brain functions: Right brain functions:
Logic Emotions, intuition
Forms strategies Presents possibilities
Sees the parts, specifics, details Sees the big picture – relationships among the parts
Breaking apart Putting together
Present and Past Present and Future
Time-bound Time-free
Safety Takes risks
Analytical Creative, Holistic
Numbers, Written language Pictures, Insight
Reasoning Imagination
Scientific skills Awareness
Sequential Simultaneous
Literal Contextual, Pragmatic

Do you dislike your job? Are you feeling stuck in a rut and powerless to do anything about it? Perhaps you know what you want to do but your big but problem gets in your way. Is your logical left side telling you “this will never work”? If so, remember that analysis and judgment (left brain functions) can get in the way of creativity, insight and imagination. That’s why when you brainstorm, it’s crucial that you suspend judgment while generating ideas.

I urge you to join me and re-ignite your imagination. Here are a few ways to give your oft-neglected right hemisphere a little love:

A toast! To our right brains!


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Parenting With Purpose: This I Believe…

Happy Mother’s Day!

While eagerly waiting for our adoption referral from China, we gave much thought to parenting. How would we raise our daughter to be strong and independent; sensitive and thoughtful; curious and happy?

Obviously, I don’t believe money is the biggest determination of a meaningful and joyful life. Success and happiness come from within, and more importantly, they take practice. How might we help her learn that life’s obstacles are not concrete barriers?

I wrote the following piece over four years ago; before we brought our daughter home. Like a business plan, it helps steer my actions in ways that I feel will result in success – for me as a parent, and for my daughter as a healthy, happy and contributing member of society. I think of it as my parental mission statement.

Our daughter turned four last week. I am pleased to report that she is blossoming into an affectionate, assertive, confident, and insightful little gal.  She makes this momma very, very proud.

Parenting With Purpose: This I Believe…

It isn’t about expecting or demanding obedience and conformity. It is about encouraging discipline, personal autonomy and individuality.

It isn’t about respecting authority. It is about respecting one another.

It isn’t about rules. It is about principles.

It isn’t about being quiet, not crying, and stuffing feelings. It’s about recognizing and appreciating the full range of human experience.

It isn’t about making my child do what’s good for her. It is about working with my child to help her learn to make the best choices.

It isn’t about teaching her how to live life to the fullest. It is about living life to the fullest while learning happens naturally.

It isn’t about blindly following directions. It is about following dreams, interests, and passions mapped out by child and parents together in a loving relationship built on mutual respect.

It isn’t about giving my child everything she wants, risking a false sense of entitlement. It is about helping her get what she wants through her own efforts.

It isn’t about spanking. It is about teaching her that aggression is never an appropriate way to resolve conflicts.

It isn’t about parents being martyrs. It is about parents modeling healthy personal boundaries.

It isn’t about “because I said so”. It is about open communication and the art of compromise.

And finally,
It is all about love.

The World’s Shortest Guide On How To Be Thin and Rich

Much has been written about how to lose weight, but it all boils down to just two things:

  1. Eat less
  2. Exercise more

Similarly, much has been written about getting wealthy, and again, the “secret” boils down to only two things:

  1. Spend less money than you earn (or to put it another way, make more money than you spend)
  2. Invest in your future

Imagine, if you do these four things, you’ll be thin and rich!

But if it’s this simple, why isn’t everyone svelte and wealthy? Please share your thoughts in the comments below.

Please visit the Carnival of Pecuniary Delights 2, Saving Money Edition hosted by Wisebread.

Plan A and Plan B

In response to my recent post, Will your parents’ financial decisions leave you holding the bag?, Steve wrote,

I agree with the premise that a person’s retirement should be taken care of before saving for a child’s education, but saving enough for one’s own future seems to be a moving target.

When does a person ‘have enough for retirement’? I am 27, with a 6 month old baby. Besides $15,000 in student loans (@ 2.6% interest rate), and a mortgage, my wife and I are debt free. We contribute to our 401k’s up to the match, and we contribute $100 a month to a Roth IRA. Since we are so young, we feel secure in our ability to save enough for retirement, so we also contribute to a 529 plan for our child.

Even though we feel secure, anything could happen at any time. Maybe one of us gets injured, and we can not work anymore. Maybe this happens to both of us. We never know, therefore I am inclined to save more. But when is it enough? If I max out my 401k, is that enough? I am 27…I may have 60 years of life left…$15,000 will not be enough if something happens next year.

I struggle with the concept of taking care of myself first, then take care of others, when there exists so many potentially negative unknowns. If I am not saving for my daughter’s education…should I not be giving money to charity? Take care myself first, right???

What is the sweet spot for annual saving for yourself, vs saving/giving to others?

Yes, the future holds many unknowns, making it difficult to be completely accurate with long-term financial planning. This deep recession, for instance, has all but destroyed many well-laid plans. The key, however, is to plan for the best while preparing for the worst. In other words, create Plan A and Plan B.

Plan A is what you hope to have happen. You hope that you’ll remain healthy and able-bodied, fully employed, happily married, able to donate money to charity, and able to save for your child’s future as well as your own.

Are you saving enough? It all depends on how much you spend now and what you anticipate spending in the future. Plug your financial considerations and planned life events into a Lifetime Financial Planner software or an Excel spreadsheet and tweak it until the numbers work.

Plan B considers what could happen; the what-ifs. You, your wife, or your child might become ill or disabled. Your marriage might not last and your assets and income could be divided in half. You might join the growing ranks of the unemployed. You might hurt someone in a car accident, get sued and lose all of your savings and everything you own.

How can you protect your finances from catastrophic incident? Buy high-deductible insurance policies, namely disability insurance, term life insurance, personal liability insurance, health insurance. Maintain and improve your job skills. Run a sideline business from your home. Consult with an attorney for additional “what-if” planning.

Additionally, save as much as you can today while you are young. Use your youth to exploit the power of compounding growth. And stay far, far, far away from consumer debt so that if something bad were to happen, you and your family could afford to live on little income.

Where does charity come into play? This is a very personal choice. Until I knew that our financial future was firmly on solid ground, I chose to donate my time rather than my money. I’ve always served as a volunteer in one way or another and not only does this help others, but it improves my set of skills, introduces me to a network of new people, and makes me feel great. This crazy busy world needs more of the gift of time from volunteers.

Should you contribute to your child’s 529 Plan? Most of us have heard a flight attendant recite these words as part of their safety spiel prior to departure:  “Please secure your own oxygen mask prior to assisting children or others”…

From Minimum Wage to Millionaire (Part 5: My Early 40′s)

Note: This post is part of a series about how I became a millionaire. The series starts here. The most recent installment (my 30’s) is here.

Happiness Is A Choice

After exiting the growing real estate bubble by selling our home, our intention was to take a year-long travel adventure across America in a recreational vehicle. We would submit our adoption paperwork before leaving and keep our eyes peeled during our road trip for the perfect place to call our next home. Then we’d decide whether it was better to buy another home or rent. We were ecstatic about the prospect of living as vagabonds for awhile before welcoming a child into our lives.

But then, two months later, my mother was diagnosed with leukemia.

Whoa. Not only did our trip preparation come to a screeching halt, but so did my carefree and positive outlook. My mom wasn’t just family — she was one of my dearest friends. She was only 59, she’d always been extremely active and up until this point, she’d been the model of perfect health. I was completely thrown for a loop.

My mom came to live with my husband and me for much of her two-and-a-half-year-long battle with cancer. I watched helplessly as her once strong body weakened, withered and starved. I’ve never before felt such intense and prolonged pain.

I realized I had to do something to avoid going completely out of my mind with fear, grief and overwhelm. I tried all the usual things: support groups, therapy, sleep. While these things certainly helped, I discovered something even better. And it was so ridiculously simple.

During this intensely difficult time, I realized that I could be happy anyway.

How? I made it my mission to look for at least five things each day that make my heart melt, my soul sing and my smile grow. I wrote a list of five happy moments everyday. I actively searched for things to add to my list. My focus changed and in turn, so did my mood. I learned that happiness takes practice. With practice, I developed a habit of feeling happy.

At first I felt like a traitor. How could I think about happy things while my mom suffered? Was I being unfair, insensitive? Fortunately, I realized that I couldn’t be a good caregiver for my mom when I felt bad. Fortunately, I chose happiness over guilt.

My Takeaway: It isn’t circumstance that dictates whether you live a happy life; it is a matter of choice.

Bonus: Happy people make more money!

Millionaire Milestone

The morning I calculated our net worth to be north of one million dollars, we were living in a rented apartment, driving a six-year-old car, and wearing used consignment store clothes. At age 40, we were “closet” millionaires.

I’ll never forget the walk we took that beautiful, sunny day. We lived in a nicely landscaped, well-appointed apartment complex half a block from a neighborhood park. Directly to the west of our community stood hundreds of $500,000 McMansions.

During our entire 20 minute walk, we saw no one else out and about. Where were our neighbors?

I suppose the kids were at school and the adults were at work.

I felt like a bird who had just been set free from the confines of its cage. My husband and I, completely unhindered by debt and financial obligations, had found freedom. Unlike our neighbors, we didn’t need to go to work!

Contrary to popular belief, most millionaire households do not live the extravagant lifestyles that many assume. In fact, a millionaire or two may be living inconspicuously next door to you. The authors of the bestseller, The Millionaire Next Door: The Surprising Secrets of America’s Wealthy found the top reason for why some people manage to accumulate wealth is that they live below their means. Many millionaires have found that living in a status neighborhood is not only a poor value, but it makes one feel the need to keep buying status objects to keep up with the Joneses.

My Takeaway: Live life your way, not like the Joneses.

Two Becomes Three

This dream of mine took ten years to come to fruition, but we had stuck to it and we reached our goal: to be financially-free before starting our family.

We submitted our adoption paperwork and eight months later, while vacationing in Hawaii, we received our daughter’s referral picture.

Since bringing our daughter home from China, we’ve scaled way back on our construction business and work only when we want to. We can afford to be selective in the projects we accept. I hired a bookkeeper to replace me so that I could focus my time, energy and attention on parenting and pursuing my hobbies. Additionally, I’ve learned how to effectively manage our investment portfolio in such a way that this task requires just one or two hours per month of my time.

Our family hasn’t set an alarm clock in years. Whether it be work, parenting or play, we wake with the sun, eager to spend each new day doing whatever we choose. For us, this is financial freedom.

My Takeaway: Hold fast to your dreams and they will come true.

…  to be continued!

The beginning of this series started here: How I Became A Millionaire: Childhood

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How I Became A Millionaire (Part 2: Early Adulthood)

Note: This post is part of a series that starts here.

After high school, I wanted to be a professional dog trainer so I enrolled in college to study the psychology of learning, animal science and animal behavior. I was working 30+ hours a week to pay my own tuition and after three semesters, I found myself tired, bored, frustrated and impatient with the required undergraduate curricula. I discovered that I wasn’t happy with the traditional education system, nor with burning the candle at both ends.

I dropped out of college and spent the next couple of years drifting from one minimum wage job to another, paying more attention to the boys I was dating than to my financial future. I ended up broke and alone after my fiancée and I broke up. I learned that I couldn’t count on Prince Charming to sweep me off of my feet and take care of me.

My parents were struggling to make ends meet, so I couldn’t go home and become a burden on them. I became more frugal: I abandoned my broken-down car, reduced my rent by sharing my one-bedroom apartment with three other women, and found free food during Happy Hour at the local bar (free appetizers with the purchase of a $2 draft). I learned to be resourceful and to do whatever it took to survive.

One night, while working the graveyard shift at a donut shop and pouring coffee for a homeless patron, I realized that I was one paycheck away from being homeless myself. That was my wakeup call. Motivated by fear of an uncertain future, I opened the Yellow Pages, called professional dog trainers and negotiated an unpaid apprenticeship. Less than a year later, I was hired by my mentor, and I loved the work. I learned the power of asking for what I want.

My mentor-employer was a great dog trainer but she made poor financial choices and lost her business. So I took two part-time jobs: one with a competing dog training school; the other as a veterinary hospital receptionist. One day, the office manager took me aside and said, “Jen, you have a smart mind and strong opinions. I realize that you have some good ideas about how this business could be improved, but you need to understand that you are not in charge here; the veterinarians are. You’re just an employee. You need to do things our way”. My response? I decided I wasn’t cut out to be “just” an employee.

…to be continued next in Part Three: My Twenties

Did you miss Part One of this series? How I Became A Millionaire: Childhood