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How To Be A Financial Genius

March 13th, 2007 · 1 Comment

If someone lives the high-status lifestyle people generally assume one of two things. First, it’s assumed that this person must have a lot of money. This person drives a luxury car, takes expensive vacations, lives in a big house and wears designer clothes. Second, it could be assumed that this person makes a lot of money. As consumers continue to accelerate the status-driven culture in which we live today, more people than ever are painting this affluent self-portrait. In this article, I’m here to tell you that most of those people could use a serious financial slap in the face. As I often do, I’ll begin with a list. The people below are encounters I’ve made over the years with financial geniuses and money morons.

  • The stereotypical immigrant who works in a convenience store selling all kinds of vices. Beer, wine, cigarettes, junk food, tabloids, lottery tickets and a two-pack of aspirin for a dollar. Sorry, that last one pains me to no end. Now, some of my readers will assume a career choice like this is relegated to the uneducated, unskilled laborer who will remain in that job forever. What if I told you that he works in that job because he owns the business? He owns the building as well. And two more residential rental properties. Plus, a half-million-dollar house in which he and his MBA-degreed wife and two kids reside. He probably owns many stocks and bonds as well. So, the next time you run into the Kwik-E-Mart for a Snickers and a Diet Coke…..look twice at that dark-skinned man behind the counter.
  • An acquaintance of mine who once received a six-figure bonus and yet he still has small debt a fraction of that bonus that is not paid off. Some credit cards, some car debt and some other bills. He could be victim of the oft-quoted, useless expression that “it’s always good to put a little on your credit card each month to keep your credit rating.” What? What? If you already live in a home with a mortgage what bigger item could you possible finance to help your credit rating? An F-16 jet? An ocean liner cruise ship? Once you’ve bought a home the odds are high you’ll never need to get approved for another loan that big. Plus, you should strive to pay cash for as much as possible as often as possible.
  • I spoke with a friend yesterday on the phone who has a CPA, an MBA, ran an overseas division and a black-belt quality certification. He took a job at our headquarters a couple years ago and uprooted the whole family to move. I had assumed the promotions were coming left and right for this fellow. I was wrong. He confided to me that most of his moves were lateral moves. The pay raises were tiny yet he bought a 3,000 square foot house and now lives paycheck to paycheck. I’d file this experience under the I-got-my-MBA-and-now-I-deserve-a-big-damn-house category. Or as they say in Texas, “big hat, no cattle.”
  • I lived next door to two retired teachers for about five years. Their house is about fifty years old now. They dress and drive cars like you’d expect from retired seventysomethings. However, it is my hunch that their net worth is probably fifty to one hundred times their last year of salary which was 1991. They have no kids so when they pass away hopefully their money won’t be wasted on nieces and nephews as an unexpected cash windfall.
  • My brother has a close friend who is completely a self-made man. His financial acumen did not come from his parents, nor his siblings. He sells to an industry that is arguably the most arrogant and affluent of all careers: doctors. You’d think he would become ensconced with the lifestyles of the rich and famous doctors to which he sells. You’d be wrong. He drove his last car for over twelve years. He earns around double the national average U.S. salary. He banks most of it. At age 29 he has several multiples of his salary laid out in retirement and investing. His company or his boss could each tell him to take a hike and it would not have a profound effect on his lifestyle for more than a year. This is a financial genius.

The list above profiles many types of financial literates. We have the convenience-store-immigrant and medical salesman who both lifted themselves up by their bootstraps in life and probably had little or no financial guidance early in life. Yet they each turned out extremely well. We have the teachers who lived a moderate, no frills lifestyle and retired very early in life to reap all the benefits of living and saving for that lifestyle. And you’ve seen the other types as well.

So, how can you become a financial genius? Again, I will conclude this article with another list.

  • Don’t succumb to Western culture’s infatuation with status and symbols. Do your kids really care if you drive a Lexus? Are the vacation memories ten years down the road any different for a Disney vacation versus going to Florida in your car and staying in a basic hotel by the beach?
  • Don’t overindulge yourself financially upon reaching the pinnacle of your career with a Ph.D., MBA, CPA, law degree, etc. Take an extended weekend vacation with the family or buy a small gadget for the house. Don’t reward yourself with a $350,000 mortgage you can’t afford and all the stress along with it.
  • Only listen to financial advice coming from someone that you believe could be out of work for a year or more and not change their lifestyle one iota. That’s a person who gives great financial advice.
  • Don’t lease your car. It merely lets you drive a car you cannot afford in the first place.
  • Try to eliminate all credit card debt. Even if it takes years to pay it off, life is far less stressful without credit card debt.
  • Don’t buy stuff you don’t need. For some, this is common sense. But how many readers of this blog spend $100 every time you go to Target/Wal-Mart/Home Depot/Lowes ?

You may not have aced your SAT exams. You may not be the sharpest tool in the shed. But if you’ve read this article you’re on your way to becoming a financial genius.

Tags: Money

1 response so far ↓

  • 1 virginia // Jul 18, 2009 at 11:00 am

    I am interested in becoming all that I can be.

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