Building Wealth - Cutting Costs

You hear liberals all the time discuss how the tax cuts by Bush were reckless. Now look I am not exactly pleased with Bush myself right now and I think his spending (and that of our both the Democrats and Republicans in Congress) is absolutely reckless and disgraceful. Yet cutting taxes makes a lot of sense, further I think we should keep cutting lower and lower.

In fact if I had my way Ron Paul would become our next President and completely cut the income tax to zero. Think that is unreasonable? Well if we cut spending to where it was just 7 years ago we could eliminate the income tax. Yea your read that right, just cut spending to 2000 levels and we do not need an income tax. That should make you really understand just how many other taxes we already pay.

I digress though, lets just talk about an easy way to understand why lower taxes are good for our economy. Now I could go into Economic theory and formulas and such but that is not necessary. I can instead explain this in a very simple and easy to understand way, think of it simply like having a “sales”. If you ran a store and wanted to sell more products would you do it by raising prices or by having a sale?

Now that is about a stupid question isn’t it? Anybody knows when stores have sales they sell more and when they jack up pricing they sell less.

The important thing to understand is that employment, investing and spending is what drives our economy. So to understand why lower taxes drive better economies from here is really easy. Let’s look at how taxes going up or down effect each of these three factors.

Employment - When taxes are lower businesses keep more of their profits rather then giving them over to the government. When a company has more money in profit they grow. As they grow they have more needs for personal and of course they hire more people. In short a lower tax is like a sale on hiring talented people. When you tax a business higher of course we have the exact opposite effect. Companies keep less profit, there is less funding available and they grow slower and hire new people at a slower rate.

Investing - This is simple to understand. If you invest money that inherently comes with risk. So if I put 50,000 dollars into an investment I could loose much of it. On the other hand if the investment does well I end up with a profit but I only keep the part I don’t pay as taxes. For me to take a risk the upside has to be attractive so of course the lower the tax on investment profits the more attractive investments are. Now if you want me to do something incredibility risky like fund a new business I better get to keep the lion’s share of my profit or there is no good reason to take the risk.

You see when taxes are low on capital gains it is like a sale on investments. Effectively I am paying less money to make more money. Did you know that at one time tax rates were as high as 90% for some income brackets. 90%! Don’t believe me look at some historical tax rates here. Now let me ask you why would anyone risk say 100,000 dollars to fund a start up business as a part owner. End up making 200,000 dollars for the investment and then have to pay all but 10,000 of it as taxes? Why in the hell would anyone take such a risk for so small of a true return? Again when this tax goes up it is like when a store raises its’ pricing and when taxes go down money flows in a “sale like” environment. Simply put when investments go on sale more investors buy more investments.

Spending - Now I am all for saving money but if no one spends any money the economy grinds to a halt. This one is the easiest of the three to understand. Tax Joe and Jane America at a lower tax rate and they keep more of their money, when people have more they spend more. In short for the average consumer lower taxes are a “sale” on everything. You just have to do a bit of inverse thinking to understand this. Joe works 10 hours a day and makes 250 dollars for his day of work. Each day he pays 100 back in tax so he profits an actual 150 dollars.

So Joe values money according to that formula. Hence he “pays” 10 hours of his effort for a 150 dollar item. Now tax Joe only 50 dollars and he now profits at 200 dollars for the day. Now a 150 dollar item only “costs” him 7.5 hours! In short by taking less taxes Joe is now buying everything at a 25% discount.

The combined effect

The reality is the economy is like an ecosystem composed of these three factors of spending, investing and employment. None can sustain themselves with out the other two. There is far more complexity then this but a basic understanding is simple.

• When more money is available to business from profit and from investors they hire more people.
• When more people are employed they have more money to spend, hence they spend it.
• When people spend more money it drives business and results in more profits
• When people can find jobs and get paid well and are taxed lower they also invest more
• Investments then feed business

It is really a circle of economic life. In this circle low taxes are like good fertilizer that makes everything healthy and grow faster. Higher taxes are like salting the earth, they lay waste to the ecosystem and stall growth. Now democrat or republican should not matter this is mathematical science and math does not lie.

Debate the role of government if you like, support a guy with an R or a D after his name or if you are smart perhaps an I. Yet don’t ever be fooled by how there is any good to come from higher taxes. Don’t let the government pitch class warfare on you saying only the “rich” are going to see higher taxes. Right now most American’s work till April 30th to pay all taxes, that is enough, more is not the answer.

Oh and yea I really meant it that we could totally eliminate the income tax, watch this video on Ron Paul for more about that.

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In the future I will discuss many specific ways that you can make money online. Remember key to our philosophy here at cut that bill is not just reducing expenses but keeping more of your money, investing it wisely and most importantly increasing your cash flow in to your household or business. There is quite simply no easier or more passive way to earn some additional money today then to do it online.

Let me be clear though, “how to do it”, is irrelevant until you get your head around the why and until you grasp how a very “small success” can drastically change your future. Let’s take three very doable numbers and consider how they could impact your life to really grasp how powerful an additional income stream from the internet can be. These figures are

• $100
• $250
• $500

Now trust me making these types of additional monthly income figures is very doable for just about anyone with a willingness to do some investing, learning and work. You will have to work harder in the beginning but such is life. Again though for now let’s stick to why you should and what it can mean. What do each of these figures mean to you,

An extra $100 dollars a month can smash 1200 dollars of out standing additional debt a year which is a good start. Paying off 1200 dollars in additional credit card or other high interest debt actually saves about 5000 dollars of long term interest if it is applied on top of your existing payments. Add 100 dollars to a typical house payment on say a 120,000 dollar mortgage and it can shave GET THIS almost 5 years off a 30 year loan. Invested at 10% and just put away it will add a quarter million to your retirement in 30 years, do it for 40 years and it is now worth about 600K added to your golden years. Remember that is only 100 dollars a month more!

An extra $250 is a lot more powerful as you might imagine, with investing you don’t just get 2.5 times the effect as compounding creates an exponential increase. Invested over 40 years of your working life that 250 dollars a month turns into over 1.5 million at simple 10% interest. Of course you can do much better then that with some creativity and participation in your financial planning. Turn to debt and you can pay down an addition 3000 dollars in debt annually which can save many in credit card debt over 20,000 dollars over the live of debt!

Step up to an additional $500 in income into your monthly cash flow and you can begin to really make a massive impact. Try 6000 dollars in additional debt destroyed per year. This alone would destroy the average of 20K in consumer debt most middle income Americans are living under in just over three years. Get out of that type of debt in three years or less and you can save massive amounts of interest. Investing gets interesting, 30 years of 500 a month at 12% interest equals GET THIS over 5 million dollars. There is even more power though!

500 a month would allow you to buy a modest second home if you wanted for vacations in some beautiful part of rural America. Don’t believe me? Fine I own a beautiful modest second home in an somewhat tourist area of the South up in the beautiful Ozarks. The place sits on 5 acres, is 15 minutes to town, 20 minutes to a beautiful lake and only about 10 people live all the dead end road the place is located on. Everyone owns at least 5 acres so the houses are very spaced apart. My total payment? With taxes and insurance 523 dollars a month. How I just looked hard enough.

Now the real beauty here is what I call my “Plan B”. Let’s say that my companies all go bust, I can’t find a job and my wifes income all of the sudden can’t cover our bills at our primary residence. Now this is not to say that everyone should invest extra income in a second/vacation home, it just begins to open your mind to the types of things you can do to build and preserve wealth with just a few hundred extra dollars of income a month.

This post is an extension of my post on, not resenting people doing better then you from a few days ago because that is also part of a “poverty consciousness” but today I am going to go deeper into this concept that I call financial cancer. So what is a poverty consciousness? In short it is the belief that money and wealth are scarce. That you have to be lucky or crooked to become rich and that cheaper is always better.

Now given my blog URL is CutThatBill.com you would think I would be all over the “cheaper is better” philosophy but I am not. There is a place for it,

• When it comes to a mortgage get the lowest rate
• When it comes to phone service pay the least
• When you buy a car negotiate the lowest sales price you can

In essence when you buy a specific item of a given quality there is no reason not to pay less if you can. Unfortunately this is not how most of the psychologically broke thinks.

I remember the first time I went back to the little coal town I grew up in after having built a successful career and life. I was going to go off on my own and do some fishing and stopped by a local donut shop for a coffee and a couple of old fashioned donuts. I was going to grab them and go but decided to sit down and enjoy my breakfast because I was on vacation and had all day.

Being alone and just browsing at a paper I heard quite clearly all the conversations around me. One word was used over and over by the mostly elderly crowd in their chit chat. That word was “cheaper”, this was “cheaper” here, that was “cheaper” there, Joe was a crook because his gas was two cents higher a gallon that at Tony’s where it was “cheaper”.

I got up and left, I just couldn’t listen any longer. Cheaper, cheaper, cheaper it was like being subjected meat grinder. While I fished that morning for small mouth bass with the sun on my back enjoying life though I realized that I used to be exactly the same way. When I lived in this town I remembered driving to Tony’s Gas Station to save the 2 cents, (5 mile drive in a car that got 10 miles to the gallon). I remembered all of it and I realized it wasn’t success that shed this constant “cheaper” search from me it was getting away from a culture married to it.

I can’t blame the people of that town, specifically the elderly on “fixed incomes” it is a poor place that never really recovered from the depression back in the 1930s. In fact my Grandfather used to say, “the Great Depression came, then it went, we never noticed.” Yet what I realized is this mentality of poverty is a big reason why my town is still poor to this day. The people all think they are poor, they expect to be poor and so they are.

After that day I realized much of this mentality was still in my head. I had shaken some of it off but not enough. I was still limiting my vision of success, of retirement of what I could expect to gain in life. I was still driving exta miles for pennies off a gallon of gas. Today I use the gas station on the side of the road that is best for when I need to pull out back into traffic.

I was still standing in supermarkets evaluating which package would have me pay less per ounce, today I buy the size that best fits my needs. Indeed even though I had money, even though I had started to build a second business and even though I was saving for retirement and paying off debt I was still on some level the poor kid from that coal town.

I believe most Americans today are still carrying their own “coal town” poverty mentality with them. It is what makes you limit your dreams one day then the very next day be stupid about how much you spend the next. Believe it or not this poverty consciousness is why people buy 50K dollar cars when one half the price is much better suited to their needs and budget. The expensive do dad makes them feel rich even though they are cash poor it helps them run from the fear or poverty.

On the other side they do things just to be cheap! They buy a 9 dollar garden hose that is kinked and useless in a year. They buy the cheapest refrigerator and it wastes electricity. They think a guy that makes 20K more a year is “rich” until they get there too and then they think the next guy 20K further up the food chain is rich.

This all stems from “poverty consciousness” if you see yourself as poor you will figure out a way to keep yourself poor. If you always look for cheaper, cheaper, cheaper then you will always have the poorest and cheapest things in your life. You will cheapen joy, you will cheapen your personal value and you will cheapen your dreams. Try not to use the word “cheap” as a positive thing.

Save cheap to describe junk. Save cheap to describe bad service. Save cheap to describe a stingy miser. Save cheap for negatives and use terms like “good value” and “excellent price” when you find a lower cost on a good item. This is just one step to removing the poverty demons from your subconscious but it is a good start.

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.

I know this seems so obvious, never take advice on money, investing and business from the broke. The problem is it is not always easy to recognize the “broke”, when I refer to people that are broke I am not saying they live in a “poor house”, make very little money and eat mealy porridge. I simply mean they are broke as in more money goes out that comes in.

Broke people live next door to you, they live in neighborhoods that are both two steps down and two steps up from yours. Broke people are everywhere, most of the people in America are broke by my definition. They are the people in huge 50K dollar SUVs that they justify as being needed “to cart the kids around in”. Jeez, how big are these kids? They have beautiful homes, nice furniture and perhaps even lawn care service. Many have vacation homes or time shares or other true luxuries. How can I call these people broke?

Easy they are broke, they have very little to no surplus cash flow, they save next to nothing other then what perhaps goes automatically into a 401K (Thank God for that at least). They have TVs on credit, cars on credit, pools on credit, some have charged the very paint on their walls and the sofa they sit on. Cut off their income for 30 days and most would loose every thing they have. They are broke because they have no “wealth” only things, stuff and the appearance of wealth.

Such people are always big talkers. They tell you “now is the time to buy” or that “that business deal seems risky” and other wonderful nuggets of advice. They tell you how great that new SUV is, how wonderful owning a plasma TV is and they always have investment advice for you.

My advice is, don’t take their advice. If you follow the advice given by most people it will lead you down the same path they are on. In other words take advice from your uncle who has that beautiful house, nice cars and kids in top schools and you may just get their yourself. Yet you will probably do it “his way” (the normal way) and be in debt up to your eyeballs and working into extended retirement years just to pay the interest on all of it.

So where do you go for advice? To the successful, to the millionaires next door. Look for the guy that pays cash for everything, the woman that has a 6 figure job and a 150,000 dollar house and a sensible car along with a nice savings account, a good team of advisers and a very fat and growing Roth IRA. These people are not “broke” they could go with out work 6 months to a year with just a bit of sacrifice if they had to.

How do you find them? There are many of us, just talk to people and you will know right away.

• The broke talk about how expensive gas is and the wealthy talk about how efficient their cars are.
• The broke think rich people are “over paid” and “thieves” and the wealthy think the rich are “generous” and “admirable”
• The broke shop for “deals” on consumer goods, the wealthy look for “deals” on real estate and investments
• The broke think cars are status symbols and the wealthy think cars are a “necessary expense”
• The broke talk about “saving money” by spending it, the wealth talk about budgeting and investing the savings

Just realize it is not income that separates the broke from the wealthy. In my town I can show you people with a household income of 100K or more that are “broke” and I can show you some with a household income of say 70K that are very “wealthy”.

Just remember this and consider it when anyone advises you how to spend your money, what to buy, how to invest and on what is important or what is safe vs risky. Now I am not saying that no broke person ever gives any decent advice. Sure many times they do, just don’t let the broke counter your instincts or justify what you know to be a mistake for short term gratification.

This post is not about setting your budget for a mortgage, taxes, insurance, etc. That is a number you need to come up with before you start even looking for a home. You need to determine what you can afford then follow this golden rule, SPEND LESS then you can afford.

What this post will do is help you find the right home for the right price with in your means. So let’s begin.

First, write down what you want this includes,

• What area you want to live in
• Your price range
• Bedrooms, Bathrooms, Garage, etc

The typical things you are looking for in a home.

Second, start to form your own idea of what is available in your area. Cruise over to Realtor.com and search properties. Drive the neighborhoods you are interested in and get prices on the houses with signs in their yards. Do your home work before you speak to a realtor. Visit new model homes, get pricing on everything. Learn what homes are like just above and below your target budget. If you are going to spend about 150K, then look at homes in the 90-250K range. Learn your market before you even think about spending a penny. Take as long as you need to do this well. Write down homes you could see yourself buying and see how long they take to sell at their price point.

Third, call a few different real estate agents (get referrals if you can). Talk to at least three, tell them exactly what type of home you want to buy, the neighborhoods you want to look it and the schools you want, etc. Be very specific. Tell the agent that you know about the phrase, “buyers are liars” and find it offensive! (I will explain buyers are liars at the end of this article). Then ask the agent what price range you should expect to have to pay to get that type of home.

In other words DO NOT let your agent start the whole interview by asking you what you can afford, you tell an agent you have a 125-150K budget and odds are you will find yourself in a 160K home! Remember you now know your market and you should get a number back from your agent that matches what you already know. Many times the number is much higher and this tells you that your agent is NOT LISTENING TO YOU, they are not understanding you. In many instances they are therefore not right for you.

Never let your agent call the shots control the relationship from the get go. They are experts, they are supposed to know more then you your preshopping will tell you if that is the case. Just because they know more then you does not mean they know what you want. Never let an agent say crap to you like, “you don’t what this” or “you really need to consider paying a bit more”. My accountant knows more then me, my financial advisors do to. Yet they work for me and are employed at my pleasure, I do not let them forget it.

Your agent may want you to sign a buyers agent contract. Never sign one that forces you to buy a home via them, one that protects you from going direct to the seller is fine. So is one that requires that if you buy a house they show you that your work with them on it but stay away from those that want a 180 day exclusive agreements. Explain you will be fair, that you want the right place for the right place and will give them the time they need to get the job done. Yet be clear they work for you and reserve the right to fire them at any time.

Fourth, choose the agent you get along with best that was at least close to the price range you expected to hear when you answered the question. Now take your maximum budget (lets call it 150K but it could be anything based on where you live and your income level, etc) and cut it by 10%! So that would in our example mean down to 135K and now your mission is to find a home that compares well with others selling at 150K. You can ALMOST always do this. Not in every market and not all the time but in most instances you can always find a deal like this.

Fifth, when you find the home you want to buy make your offer at least 10% below the asking price. So on this 135K home you now offer about 123K! All the seller can do is say no, you can always offer more, what do you think is going to happen? Do you think they might be so offended as to raise the price to 180? The only risk is someone else will buy the home. So what you must be willing to walk away from any deal. Most times when you low ball at precisely 10% the agent on the other end “gets it”, they generaly counter offer in the middle some where, you just might get that home worth 150 that is listed at 135 for 130.

There are always deals

Such deals are possible and in fact anyone can get one! I have done it on the last three homes I purchased. I bought one for just 84K and sold it for 109K just two years later with no improvements other then a deck. I bought another for 135 that was appraised at 159 and sold in three years later for a few pennies under 200K.

My latest find was a house easily worth 170 that was listed for 139 and I paid get this 120! How come, the listing agent was an idiot! The home had a second living area, a huge yard (1/3rd of an acre average lots are 1/10th), and a home office. The listing agent listed the house as a 3 bedroom, 2 bath, 2 car garage home, brick and vinyl. Nothing more! The guy should have been shot but it was my gain, we offered 115 they countered at 120 and I jumped on it.

The owners were days from having to start paying a second mortgage and I got the place for a song. Honestly there wasn’t another house with all of this going for it under 200K with in 10 miles of it but the buyer had to sell. The house was on a culdesac so it got no drive by traffic and the agent clearly blew the marketing.

So there you go a blueprint for finding the best deal on a home. Will it work in those white hot markets where houses sell in 24 hours? Not usually but generally just outside of those areas there are deals just waiting to be had. Be flexible, consider your options and spend LESS then you can afford. With a little work you can really get a great deal and build a solid investment from day one. Just remember real estate is not a game, you are not in it to be nice or make friends or even help people. You have to be tough, stand your ground and walk away if you need to.

Let me be clear I don’t think you have a safe, secure job today if you work even say for the Post Office or even a State Government agency. I believe firmly with the toxicity of debt in both the consumer credit card market and the sub prime lending market a major recession is coming. We won’t die off, no one will jump from tall buildings on Wall Street and the dust bowel is not comming back but there also may no longer be “two chickens in ever pot”. Todays “chickens” are Plasma TVs and other do dads.

Right now there is over 1 Tillion Dollars in toxic debt in the consumer credit market, that is money that will NEVER get paid back. The American tax payer has had enough, we won’t bleed money any more. Social Security is getting to where you as a working member of society have you “own old person” to provide for, it will change and that will be good but short term it will hurt.

The dollar weakens almost daily now! Canada now has a stronger dollar then the US that has never happened. The weak dollar is supposed to help fix the multi trillion dollar trade deficit we have with the world, it does nothing of the sort. The biggest potential export markets for us are China and Japan and both artificially tie their currency to the dollar. When the dollar drops so does the Yen by an equal amount. All a weak dollar does is make your money worth less and less in the global market.

My point is this can’t all just stand as the house of cards it is today and there will come a time soon when some of the bills will have to be paid. When that happens there will not be enough money to pay it. At that point employers are going to feel it hard and tough decisions will have to be made. Your boss might love you but if it comes down to the company surviving and your employment he will have that hard talk with you about some measly severance package. Odds are in many instances he will then get to have the same talk with his boss and so on.

How bad will it be? I do not pretend to know but it will be worse then it is today, that I am sure of. My real point though is it doesn’t really matter does it how many people loose jobs? All that matters to you is if and when you loose yours! It can happen to the best of us, it happened to me and because I live by the things I teach and write about it just wasn’t that big of an issue.

My point is you need to live as though you are currently in the hight of summer. You must buget and make spending choices with the view that you are right now at the peak of your earnings, you must plan for a big decline that can come at any time. This does not mean that you live in fear only that you live free from illusions.

If right now this second you or your spouse lost a job and were unable to replace it quickly how long would your last before you started to go negative on paying your bills. How long till you lost your house or got evicted from your apartment? The average American could scarcely make it 30-60 days! Many are but one or two paychecks from bankruptcy!

How do people get in this position? The belief that a paycheck is an entitlement that’s how. It amazes me how entitled employees tend to be in relation to their employers. Just look at the auto and airline unions, they keep getting more and more from their employers but the problem is the airlines and the car makers no longer can pay the bills. They are putting their very security in jeopardy by always wanting more, more, more.

So what is the solution? - Here are ten things you should be doing starting yesterday.

First - Never see yourself as secure in your job, have a plan B. Always know which competitor or similar company would be best for you to go work for. Cultivate relationships within said company, don’t act like you are ready to switch if you are not but be on the radar.

Second - Build a big network of contacts in your line of work, I don’t care if it is packing boxes or running companies as a CEO. Build network of people around you that can help you if you ever need a new job.

Third - Live below your means! Nothing is more important, make sure you buy less house then you can afford. Buy a cheaper to own and maintain and fuel car that you really have to settle for. In short never buy what you can afford today, buy what you should still be able to afford with far less then you have.

Fourth - If you deep in debt get out now! If have home equity and large credit card debt refinance your house and pay off the cards, then cut them to pieces.

Five - Buy and own a home! Renting has a place but as soon as you can afford to own a home the right way do it. Buy smart, pay less then the house is worth, find a deal, there are always deals. Know this variable rate mortgages are the devil, if you can’t afford the home with a fixed loan, you can’t afford the home!

Six - Build a second income, in other words own your own small business. You know how to do, make or advise on something better then most people. Find a way, anyway to make money with it. Do private consulting, build online income (this is what I do) hell just by blogging you can make 500-1000 dollars a month, (I will show you how in the future). Someway, somehow develop a second and even a third stream of income.

Seven - Save money outside of just your 401K, IRA, etc. The golden rule is get to where you save 10% of your income in an IRA or other tax deffered acocunt. That money is locked away until you retire though. I am all for 10% going to retirement as long as you can save say 15%. If today all you can afford to save is 10% put 5 into a long term locked away account and 5% where you can get to it with out penalty if you need it. Build an emergency fund of at least 90 days of your current income before you lower your savings contributions to liquid accounts.

Eight - Plan on being fired, your company being bought, your job being downsized, etc. It may never happen but plan on it. The very act of viewing such things as a possibility will make you smarter in your decisions every day. It will also make you more level headed and able to stand the hardship if it comes. Again do not live in fear, just follow the boy scout wisdom of “be prepared”.

Nine - Educate yourself in and outside of your current employment niche. When I lost a job about 8 years ago it became an opportunity! I went from Sales Management into online marketing and became very successful. The reason was simple in my sales career I educated myself on how to sell all the time. At the same time I taught myself how to market on and off line. I took my sales knowledge and put it to use online with my new skills. This was my “secondary income” a tiny small business that was making me about 500 dollars a month. I turned it into a new career because I had become a learning sponge. Today I own companies because of this education I gave myself. Be it online, via books, classes, seminars, I don’t care what invest both time and money in educating yourself.

Ten - Be the supreme commander of your own life and destiny. Every day think about how you can do better for yourself, your family and your employer. Your job IS NOT a right, you salary IS NOT an entitlement. Get that into your head right now this second. Would you take a raise if it was enough to damage your companies future? If you can answer that with a yes you should be fired! See yourself as an independent contractor, self employed no matter what your job is about. You should get paid as much as you can with in reason, many are underpaid but many people are also over paid. Work hard enough to be able to demand and expect more.

The key here all goes back to one thing though, no job is secure today. That false belief has put many people into massive debt and financial ruin along with a retirement in poverty. Sure this post was an ass kicking but most of America needs one from time to time.

Here is the most painless way I know to cut your spending effectively. For the next 30 days just write down every dime you spend, every bill, etc should be in your check book already but write those down anyway too. Get a simple note book and record every single dime, read it every night before bed and just keep going. Write your required spending (bills you have to pay, light, heat, mortgage/rent, cable, weekly groceries, etc.) in one section of the book and all other expenditures in another section.

Don’t judge yourself much just record every penny. I mean if you give the kid a quarter for a gum machine write it down. That coffee at Starbucks, that bag of candy, what ever just record it. Do this religiously for 30 days, don’t cheat trust me you will benefit from this simple action.

Now try something I think might shock you. Take just the expenditures on things other then required bills and total them for each week. Make a graph of your weekly spend over 4 weeks. Odds are you will spend a lot less in week 4 then you did in week one. Remember no one told you to spend less, told you what to cut your spending on etc.

The simple act of being aware of what you spend, where and how you spend it will connect with your inner common sense. We all waste money, hell I do it! The key is to waste it consciously not unconsciously. Choose your play don’t just spend until it is gone.

Those of you who make middle to upper incomes will benefit the most with this technique. In fact the more you make the more you need to do this. This was the technique I used to reel myself back in as I went up in income. The more you have the more you tend to blow as you get to a point where you can pay all your bills easily and have good investments going on you get very complacent with what is left.

No matter your income be it 20K a year or 200K a year I challenge you to give this record keeping a try, most will be very shocked and pleased with the results over 30, 60 and 90 days. If you don’t do this all the time whenever you start to blow to much money, use it as a tune up. Remember you are your own boss and you need to be kicking your own ass once in a while.