Building Wealth - Cutting Costs

If you have read this blog for any length of time then you know I am big on teaching children to save, invest and understand money from an early age. What I have observed in talking with people from many generations is that there is a direct correlation between how a person views both money and debt and what generation they come from.

My Grandfather’s generation saw debt as a prison and felt that you should scrape and save every penny you could. My father was a lot like his grandfather and passed much of that wisdom to me but yet his generation was more open to some debt and some more free spending. In my generation people live in debt (I am a Gen X’r) and the Y generation is graduating college with enough debt to fund most first home mortgages. With each succeeding generation comes more spending, less savings and more debt.

I really feel it was my firm connection to immigrant grandparents that went through hell to get here, then dealt with the great depression and then served in World War 2 that cemented my firm conviction in the principles of saving, keeping debt low and always planning for a “rainy day” that I discuss on this blog.

One thing I think parents can do with children to ground them in these sound principles is to make sure they are connected to their roots. So when I was asked to look at a website where you could build a family tree for free I was happy to do it.   The site is called Tribal Pages and it is very cool and at a cost of free it is a great low cost activity for you to do with your kids and involve the rest of the family.

As you build out your tree you have you are able to do it on your own free web page, other family members can view it online and help you fill in missing spots. (Don’t worry if you are not technical it is a very easy system to use.) I firmly believe that a child that knows their past and how hard their ancestors worked to ensure they could have the opportunities we do today will be more likely to value money and opportunity. When I interview and hire people from Gen X and Gen Y, I see a ton of “entitlement attitude” and it really bothers me. Most people today seem very disconnected from the reality of just 50 years ago.

So if you want your kids to value what they have and in fact if you want to value it more yourself I encourage you to research your past, build a family tree and understand why we have so much opportunity today. Research the values of your family a generation or three ago and build that connection. Tribal Pages definitely makes my list of recommended sites for providing a great service at no cost that helps families understand and preserve their identities.

Item number one of the philosophy that drives everything we do on this site is “Debt sucks! Stay out of it as much as you can” and I most certainly do include “student loans” in that viewpoint. Now I realize that for some students taking some student loans will be the only way to pay for 4 years of college I just believe you should borrow the absolute minimum amount you can. Student loans are not for supporting a lifestyle they should be used to fund tuition, books and direct educational expenses.

My biggest issue is that many young people are lured into massive student loan debt while billions of dollars in college grants and scholarships go unclaimed every single year. Let me repeat that fact billions of dollars in educational grants and scholarships that never have to be paid back go unclaimed every single year while students go into deep debt to fund their educations.

That is why I am a big fan of websites like Scholarships.com that help put students in touch with those funds. So if you or someone you care about is getting ready to go off to college or is even currently in college please make sure to take advantage of every way to fund that education that is possible. Even just a few partial scholarships and grants can have a massive effect on long term debt.

I have talked to new grads that come out of school over 75,000 dollars in debt. In many places that will buy a person a starter home! Debt is cancer always remember that it must be used as a tool and only as it is needed. Right now this very second there is more then 19 Billion dollars waiting at Scholarships.com to help fund educational needs so please make sure to check out their website, set up a free account and find ways other then more debt to fund educational expenses.

For helping young people reduce debt and achieve educational goals Scholarships.com certainly makes my list of recommended sites.

It seems like forever ago when I first built my first website. In fact it was more then 10 years ago and at times it is easy to loose touch with how overwhelming it is for a brand new potential internet entrepreneur who wants to get started today. So I though I would share four ways a new person can begin to get started. None are all that hard but none can be complete with out learning more, these are just starting points.

1. Get a blog and do some blogging for dollars. I suggest you try not to be to obvious about this because Google has begun to give the smack down to bloggers that do this. I recommend you never use the name of the companies that you go through to find business on your blog as you are just asking for problems. What I can simply say is go to google and search for “get paid to blog” and you will find many options.

Now you are going to have to blog for about 90 days and do so at least 4 times a month to qualify for these types of services. Once you do however, you can and will make money. I won’t go deeper right now but will make some specific how to details available in the future. Let me just say that anyone that wants to can put an extra 500-1500 a month into their income column can just by doing this.

2. Learn the very basics of website design and publishing, even a tiny bit of say PHP programming can go a long way. Today if you can slap together a website you can make some money. Spend the money for a good design software and take a course on it at a community college or a CEU class at a university. Total investment may be about 1,000 dollars and it may make you a lot more then any degree will. You don’t have to be a great designer but at least be able to build simple sites, you can out source the actual “graphics” work.

Most sites are nothing but a header, a footer and some pictures. Outsource your graphics and build a site. Make your first site about something you just love to talk about and don’t worry if you make a dime on it. All you need at first is the “ability” to build and design sites. Learn how to do it and do not rely on site builders they are to limiting. Today if you can publish content there are countless ways to make money. Oh and you can pay your tuition with one months worth of blogging with suggestion number one above.

3. Start with affiliate marketing and take your skills from item two to build unique websites that provide information, build email lists and sell a few products around a niche. Later you may and honestly should create your own products and keep all your profits but in the beginning you are learning how to market and sell online so dedicate all your efforts to doing so.

A great source of items that others have made that you can sell for about a 50% commission can be found at Click Bank. Odd are there is a product about any subject you can think of. Most sell in the 50 dollar range and pay about 25 dollars in commission. You don’t have to make anything, deal with customers, etc. This is not a long term way to get rich but it is a great way to learn and earn at the same time.

4. Become an adSense Affiliate and a Yahoo Publisher, neither pay the big money they used to but they are both very passive ways to earn some extra money. In time with enough sites anyone can pull in a hundred dollars a month at least. Remember invest 100 dollars a month from age 18-65 in quality funds in a tax deferred or sheltered account and you are a multi millionaire.

The key with adSense and Publisher is make your ads blend into your sites. The inexpensive wine site I reviewed a few days ago does a good job at this. Use back ground colors that match, make the links the same color as links on your site and above all no borders for the ads. Then be sure to put the ads in prominent spots on your site, don’t hide them remember you want people to click on them.

So there you go 4 places to get started with making money online. Each has its on benifits and challenges yet if you commited to learning how to at least do all four in the next 6 months you are well on your way to truly building a solid and passive online income. In time you out source more and more and you don’t do all the work yourself. Yet in the beginning it is important to be sure you understand things, learn what you want and what you don’t want.

More then that learn to make some money asap and again bloggin for dollars is a 100% guaranteed way to start the income flow. From there you can branch out, learn more and keep building.

One more important thing. Don’t buy over priced crap, info courses and other bullshit. There are countless gurus out there, well countless self appointed internet marketing gurus that claim to have the secret to making money. They are mostly full of crap and even the ones with good info unless you learn the fundamentals first it won’t do you any good.

Start with free advice and perhaps use some of the online video courses that don’t cost to much. Learn basics, learn “how to” and then you can develop “what to” on your own terms. I promise you one of the surest ways to kill of your future in making money online is buying one to many 297 or 997 dollar how to courses.

Don’t buy that crap, start with a blog, learn to make sites, practice with affiliate products and sell ad space along the way with Google and Yahoo. Look for solid how to advice and instruction and limit your spending on “education” to 50 dollars or less a month (other then stuff like the college course I mentioned) and you will in time work things out. Gurus exist not to make you rich, they exist to enrich themselves with your dollars.

Let me be blunt you will never and I mean never become wealthy so long as you resent people who are wealthy. This has been written about extensively by Robert Kiyosaki in his Rich Dad Poor Dad series. Yet I think it is worth repeating here because I believe it is the single biggest reason the poor and the broke stay poor and broke.

Follow this simple logic, in the 50s and 60s many blue collar families had parents working say construction (you can fill it in with just about any trade) and all through the 70s etc young men grew up and if they were not college bound aspired to work construction. Hence middle Americans worked construction jobs for many decades. These jobs paid for houses, college tuitions, retirements and life in general.

In short being a “construction worker” had a certain status. It was considered a good paying blue collar career. Sure you had to work hard but Americans valued hard work and some kids never wanted college they wanted to build things, run back hoes and tear old buildings down. Who can blame them while hard work playing with heavy equipment is kind of fun.

Now a whole book on why construction wages fell over the 80s, 90s and 2000’s could be written. Floods of illegal cheap labor, a weakening job market, etc. Today we also seem to believe that every child should go to college and get a degree. We have forgotten that we need a middle class, a blue collar work pool, we have stopped valuing hard physical work as an admirable quality.

So how many kids today have a positive view of being a back hoe operator, or framing houses or building roads? The answer is not many, today that is something most people “settle for” not what they aspire to. Hence not many young men grow up in the US and become construction workers any longer. The logic is quite simple when people have a negative view of a profession, a place in life, a title, etc. they tend not to become what they dislike.

Pretty obvious, not ground breaking, what does this all have to do with wealth and money?

Simple if you see rich people and grumble, if you think the guy that is already in the 35% tax bracket should pay more and if you think all corporate executives are “rich jerks” you are going to have a real hard time moving up in income. Even if you do you will become what I call the “highly paid broke“. That means you will blow all your money and simply match spending to your income to satisfy material needs.

I see people all the time that resent the wealthy and the rich. I watch them grumble when Bill Gates gives 4 Billion to charity, they say with irritation “well he has it to give”. Then you put together an office pool to buy kids toys at Christmas or help a needy family and these same people make excuses and often give nothing. Don’t get me wrong there are poor people that give all they can, very generous folks, most however, don’t resent the wealthy.

Simply put if you want to be wealthy you must first have a very positive view of wealthy people. You can’t begrudge a guy his lifestyle then expect to achieve it yourself. I believe as I stated before this is the NUMBER ONE reason people stay poor and or broke. So the next time the urge to scoff at a successful person crosses your path, ask yourself, “do I want to become wealthy?”.

If the answer is yes think twice before you reinforce to yourself once again that being wealthy is a negative thing only achieved by insiders, the greedy and the lazy. You are going to have a real diffcult time doing what it takes to become wealthy if that is your view of those who have already done it successfully.

Part of the benefit of having extra money is the ability to spend some of it. I believe in cutting costs, investing wisely and building wealth and security. Yet I also believe in enjoying life along the way, if not then what is the point? Any of us could die tomorrow so the key is to balance living for today with planning for tomorrow. So what are some of the things I spend more money on then I should or some of the stuff I just buy when I am bored? Here are a few,

• Starbucks Coffee - I will admit it, I am a caffeine fiend. When I made a lot less money Starbucks was a luxuary that I enjoyed once in a while, now I don’t go a day without a Vente Cappuccino or two. This is extravagance, a waste, a senseless spending that I end up with nothing to show for. Still it makes me happy and I have no real debt to worry about any more, I don’t stop investing to fund it and I only pay in cash so I have the money in my pocket each week to cover the expense.

• My Animals - I have dogs, cats and a lot of reptiles. As a child I wanted to be a herpetologist (a biologist who studies reptiles) but the lure of business was too powerful and I never went to college to pursue the biology degree. When I didn’t have much money and was in debt heavily I kept no pets, today I have an abundance of animals around me. I do breed the reptiles and one day they may pay for themselves but for now all the animals are an expense that never returns any money. Yet the dogs and cats bring joy to me and the family and the reptiles allow me to fufil my childhood dream of being a researcher working with snakes.

• Gadgets - I have all kinds of electronic do dads and I buy something new at least every month. Cameras, software, media players, etc. I just love technology, I like seeing what you can do with it, what you can create and what the latest craze is before it hits. Some of the stuff like my Blackberry has a real purpose for work and organization but most is just for fun. I didn’t need a Sony Alpha DSLR but I bought one because I wanted it. I always pay cash for these gadgets but I must admit I blow money on them. Most are never used to turn a profit I just enjoy having them.

Now let’s say I am bored and just want to go out bumping around with my wife to shops and what not. Doing so will almost always result in spending money! We are all human though and just sitting at home counting money can get old and you don’t always want to really plan an activity so “shopping” (our parents window shopped but we seem to have failed to inherit that ability) has become an American past time. Here are some things I have done to allow me the activity with out totally blowing it.

• Silver Coins - I am a huge fan of American Eagle Coins and often during a jaunt out I stop by one of several local coin shops and buy one or three of them. I keep them in plastic tubes and have been doing this past time for about 10 years now. I occasionally buy more numismaticly valuable coins, mostly older silver dollar and silver half dollar coins. The Eagles have a fixed value against the silver market price (at least newer ones do) so they are decent investments. The other coins have a bit of “subjective value” based on both the silver and collector markets combined. Still even they have a basis based on the price of silver. I will never make a mint on this but there is a value to these coins that will grow. So I get to browse, spend money and not just throw it away.

• Houses - I shop for houses all the time and the beauty of this is multiple. There are always countless new model homes to take a look at, walk around in etc. You never impulse buy a home so that is nice, I shop a lot and buy very seldom. The biggest value is I know my real estate market cold, I know exactly what different types of homes in different areas sell for. So I do know a deal when it pops up. This is the best rule I can give you if you want to invest in real estate some day, window shop houses for a year or so first. Record how long those “great deals” take to sell and keep your whits about you. In time you find gems and when you do you will know it.

• Books - I love knowledge and I love to shop for books, both audio and print. To help with my addiction I shop mostly at Half Price Books so I pay less per book then buying new. A used book is no big handicap to reading it so I just can’t see paying full price unless I want a new book. Then here is the best part, some of these go into my home library but others I read, am done with and sell them back to half price books. They generally pay about 20% or what I bought them for.

So there you go some ways I admit to just blowing money and other ways I stave off boredom with shopping that doesn’t just reduce my net worth dollar per dollar.

OK I have to give credit for this idea to my Brother-In-Law (we will call him Mark).  I took a different approach to saving for college for my son.  In our case simply set up a 529 plan for our son, made contributions as part of our financial plan and he is now in college and can do four years (including housing) as a state college with no debt and almost on out of pocket expense.  While this seems wonderful a bit of it is already biting us in the rear.  Our boy just doesn’t seem to realize how lucky that makes him.  I am glad we did it but what I am about to lay out for you is a much better solution at least to a degree.

What Mark has been doing since both children were born is both simple, cost free and may I say genius.

Every kid has birthdays, Christmases, Easters and many other times that relatives, friends etc send them cards and gifts and very often money.  Mark has required that 50% of his two children’s financial gifts (no matter how small or large) go into savings accounts to be used for college.   He choose very safe investments and did not elect to use a 529 due to its restrictions.

What does this mean to his kids?  Upon Graduation both will have over 20,000 dollars in funding toward schooling or life in general if they choose not to go to conventional college.   I should point out that this is not a family the gets huge amounts of money for each event, we are talking 20 bucks here, 5 bucks there, may be 50-100 for a Christmas that goes into these funds.  Mark requires his kids to save this money no matter the source.  If they come over to my house and I give them a ten a piece for spending money, Dad puts 5 bucks a piece away, just like clockwork.  The fact that 18-20 years is a very long time for money to grow, takes care of the rest.

Some of the family thinks this is “taking away the fun of just being a kid”, most of our family is BROKE by the way!  Taking advice from the broke is a good way to not only be broke but build generations of kids and grandkids that are broke too.  Mark wisely has ignored this and I think when his kiddos go to college or start a business or do what ever with their money as adults they will put more value on the funds.

Now we did teach our son to save, we helped him invest in stocks, set up accounts and always made him put some money away.  Yet if I had it to do over I would have also had some allocation go to his college fund directly from his hands.  Not just to increase the funds available but to give him a true sense of ownership, responsibility and gratitude for the fact that this money is available.

What I know is this my niece and nehpiew will have real options when they finish high school.  Options my brother-in-law would be hard pressed to provide on their household income.  All this from the simple wisdom of “pay yourself first”.  Consider it the next time your little ones get a card from Grandpa Joe or Aunt Betty.  A few less do-dads today for a real kick start to life tomorrow.

If you really want to be successful financially you have to follow the intuitive wisdom of the 12 year old that plays Pop Warner Football. That 12 year old sees himself as Bret Farve or Randy Moss or whoever his favorite player is when he takes the field. In his head he hears the crowd and when he makes the catch, tackle or completes a pass for a second he is that superstar.

When you want to build wealth and success you need to do the same thing. You need your own heroes to follow and model yourself after. Here are some of mine and why I follow their lead.

Donald Trump - I admire Donald Trump for a large number of reasons. His success as an entrepreneur and real estate investor of course speaks for itself. On the personal side, Trump often comes across as a real jerk but that is just who he is. Believe it or not I admire that as well, despite being in the public eye he does not try to make the public happy. He is who he is and if you don’t like it, tough! I respect that a great deal.

Trump is also completely honest with people (this is a big part of why he is considered a jerk) about the way he sees things. I never have felt that Trump is someone with a hidden political agenda, he is a patriot, a success and a tough business person with a world class team around him. Trump has also put great deal of effort into establishing educational programs for real estate investing and other financial education programs.

Richard Branson - Branson is a real entrepreneur and has a life envied by many but experienced by very few. Despite being amoung the richest people in the world though he is remarkably down to earth and even reasonably accessible. When you hear him interviewed you think he could just be a bit of an eccentric British guy that lived next door to you.

He owns Necker Island where he maintains his primary residence which was recently featured as the number one celebrity home ahead of Hugh Hefner and Bill Gates! Yet if you met him in a bar tomorrow he would sit down and have a beer or three with you. He has failed more times then he has succeeded in building companies yet he keeps doing it because he loves being a true entrepreneur.

Warren Buffett - Warren began working in his fathers broakrage firm at the age of 11 and never looked back. Known as “America’s most successful investor” I can’t help but admire him. Buffett employed a three pronged approach

• Generals: undervalued securities that possess margin of safety and meet expected return-to-risk characteristics
• Arbitrages: company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.
• Controls: build sizable holdings, ally with other shareholders or employ proxies to effect changes in companies

This approach has made him one of the richest men in the world but was actually a very “safe approach” to investing.

Jimmy Buffett - No not Warren’s brother and that is no typo either. I am talking about party hardy, parrot head, Margaritaville singing Jimmy Buffett from Mobile Alabama. Jimmy speaks to my fun side, the part of me that takes 15 days off, lays on a beach and just lets everyone else deal with my businesses two times a year. He is my “someday” archetype. The old man I want to be when all my battles have been fought and I fish on the beach and drink rum from a coconut.

There is more to Jimmy though, Mr Jim is rich my friends, very, very rich! He has worked branding magic around the “Margaritaville” theme and now owns bars, merchandising and a premium Tequila label. At the same time he has only done what he loved doing. When he first went to Nashville he was rejected by 18 consecutive record label executives, so he kept playing bars and clubs and being who he was.

The rest is history and now despite not having a top ten record in two decades he still sells out just about every show he does and his fans still want more. There are Buffett fans (Parrot Heads) from 8 - 80 and their numbers continue to grow. Why, Jimmy created an image, a brand and did so by being himself. To me that makes him a very successful business person.

Henry Ford - Henry could never have gotten into college even with a bribe, he did not have the grades, the desire or the “book smarts” for it. Yet he is more associated with the automobile then any of the people that actually invented it. Henry took automation to the extreme and made the assembly line a reality and brought the car to the average American. That one achievement may have had more influence on the wealth and growth of the United States then any other person from his era.

Not content to just make cars though, Henry was a master of efficiency. When suppliers bid on supplying him with engines he required the crates they came in to be made to specific specifications. Wanting his business his suppliers agreed, the crates were then disassembled by his workers and formed the floor boards of the Model T. Despite that he had massive amounts of scrap wood from all the shipping crates so he teamed up with E. G. Kingsford, who was a local real-estate agent, to buy land for a massive wood production and charcoal processing plant. With all the waste in government and business today we could use some guys like Ford around.

So those are my heroes in business! I have others but those are my big ones when it comes to money, building businesses and investing. I suggest you assemble your own heroes list. Be inspired by them, know their stories and utilize that creative visualization children do so well in back yards and school stadiums to reach further then you can on your own.