Freedom and money create the ability to chose. Or, as an ex-girlfriend once explained to me, money gives one the option to say “no”. To almost anything.
It’s a counter-intuitive idea. We normally associate the attraction of wealth with increasing choice, with opening up possibilities. That’s true in an abstract way, but the act of making a choice implies un-choosing something. We cannot in fact choose everything, so an affirmative action has a consequence that precludes something else.
If I choose skiing in Montana this weekend, I choose not to snorkel off St Lucia. Or I can forgo any of the fancy stuff and stay at home with a book.
The reason to have money, to avail ourselves of the freedom it provides, is to allow the absolute best choices. Sometimes that means simply saying “no”. And if you are yet to have wealth, making the best choices open to you is part of the pathway there.
Warren Buffett’s secret isn’t a secret. His accumulation of wealth comes down to this simple set of principles.
1. Create a regular income, preferably from multiple streams.
2. Spend less than the amount you make from 1, above.
3. Invest the difference between 1. and 2., above, in income-producing assets.
I know, this is childishly simple. Buffett’s income actually came from his insurance company businesses, mostly GEICO. The big difference between insurance income and our income is…
4. Ensure that the time between you receiving your income and paying it out is as long as possible.
When an insurance company takes your premium, they often have many months or years between that time and when they must pay out claims. If your claims are less than the premium you accrue, and there is time between the two events, you end up with an enormous amount of investable money.
Buffett calls this “the float” and it made him rich. Rich beyond understanding.
The point is that even if we don’t own an insurance company, the principles remain. Spend less than you earn. Diversify into passive or recurrent income streams. Allow compounding to work. Be persistent.
If I think a particular way about something, others do too. It’ll be an unknown percentage of any population, but I’m not deluded enough to think my ideas are any different from the bloke or bloke-ette ahead in the coffee line. He or she is wondering the same thing as me: Why is the coffee line taking so long?
Selling to me is actually pretty easy. I’m interested in new and different and shiny, but I am annoyed by the subterfuge of tricky sales maneuvers. The first new car I bought, a Mazda MX-5, back in 1993, was my first experience of “the grind”. In the car business, the grind is the time-wasting and frustration-inducing process that some salespeople use to manipulate you into taking their finance deal, or otherwise get more money. It didn’t work on me, because I had cash, and knew a fair price for the car. The guy had no leverage. I left feeling he was a fool for not being honest with me. His loss.
Now that I do selling for myself, I took that lesson to heart. I’m as upfront as possible. Yes, this is a request to give you a sales presentation. Of course I’m planning on making money by selling. Naturally I want you as a customer. What’s the point of me doing this otherwise?
The corollary of this brutal honesty is the following:
The products I sell are ones I use and love myself. Yes, love.
I believe my company’s products can (and more than likely will) improve your life.
I know my company’s products are at least as good as any supermarket brand.
I know my company’s products are a better value than any supermarket brand.
I know my company’s products are better for you, better for your household, and better for the planet.
Hello. I’m Tim. Are you interested in my sales presentation?
Self-help books extoll a life of satisfaction from self-expression. Find your passion, and make it work for you. Don’t be satisfied until your reservoir of pent-up you-ness is fully drained and out there in the world.
Great. I wish everyone on that quest the best of luck.
The problem I have seen with that approach to life is that stuff gets in the way. Pesky stuff like utility bills, the need for food, and landlords wanting their rent. It’s a hassle, man, just keeping your head above water.
So the kind of self-help book that should be written would follow this kind of recipe for life:
1. You will always need a minimum income simply to get up in the morning. Find out what that is, and understand that it will vary over the course of your life.
2. If your passion, the thing you most want to do can provide you with that amount of money (and hopefully a little extra) then go right ahead and indulge yourself.
3. If your passion isn’t, cannot, or won’t likely in the future come close to creating the cashflow required in point 1, above, do something that will, then…
4. …pursue your passion as a hobby.
Having a jones for a particular way of spending your days will not overcome the misery of being poor, or behind on the rent, or interminably in debt. Debt squashes everything about your life, by which I specifically mean your freedom…freedom to be creative, freedom to have ideas, even your freedom to look clearly at the world. Likewise if you have insufficient money to pay all your monthly bills. If you are struggling to make ends meet, if there’s more month left at the end of your money, you’ll be miserable. And miserable people stop having passions.
So here’s my hierarchy of self-help: Be able to pay your bills. If possible, be able to pay your bills with recurrent income. Once you know the bills can be paid, then you can try your passion, to see if that makes money. Self-help is about never needing help from others. That’s a somewhat different spin than all those books provide, don’t you think?