Building Wealth - Cutting Costs

Super Tuesday is today and I am excited about one thing and only one thing about it.  You see I am in  state that votes AFTER Super Tuesday in fact we don’t do our primary until March.  In general no one cares how we vote in the primaries because by March most nominations are sewn up.

Not this year!  I will vote in the Republican primary and my vote will matter and so will the votes of others in my state.  My guy is Ron Paul and I will stick by him if he has any chance at all by the time we vote, if not I may have to go with Mitt Romney or Mike Huckabee as my second pick.  I have not forgotten the sell outs of John McCain on things like McCain - Feingold and McCain - Kennedy I hope my fellow Republicans don’t either.

Yet this post is not about who I am voting for or who you vote for just I want to ask, why is it only in a year like this that my primary election matters?  Do you think the primary elections would be better if we had say 4 blocks, 25% of the country in each one and all of it done in 60 days?

I do and further more I would rotate each election which “block” went first.  Seems like a much better way to me, what do you think.

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.

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.

Cutting the monthly cost of your expenses does not have to be difficult and it often involves just doing a few simple things that we know we should do. Often it is simply that we don’t want to take the time to make a phone call, send a letter or deal with the hassle of making a change on an account or service.Yet this is a mistake, a place where apathy can cost you thousands of dollars or more over your life time. Consider a five dollar a month savings, not much right, sixty bucks a year. Well, 60 dollars a year, times 45 working years until you retire and that five bucks a month now equals 2700 dollars you could have invested. The big things is there are lots of five bucks here, and ten bucks there you can harvest right from your own home with out any sacrifice.

Consider home phone service for instance. Do you even care who’s name is on your bill? If you get your internet access from the cable company you might do what millions already have, use your cell phone as your only phone and throw out the home phone all together. Or Consider Broadband Phone options that you can run on your Cable Internet connection, they often cost well under twenty five dollars a month or less including any taxes or fees.

If you want to keep your conventional phone service one provider I really recommend is Cleartel. They are not available everywhere but if you are lucky enough to be able to get them you can get great service at a real savings.

I bring up phone service because it is easy to cut costs on but it is only one example. Look at every recurring monthly bill and consider your options. Mortgage refinance is not a fun process but with rates where they are it might put a hundred dollars or more a month into your pocket. What is 100 times the number of months you have left to work in your career? Electric service has been deregulated in many states so see if you have options there. A simple call to a credit card company and the phrase, “can I talk to a supervisor” or “then can you put me in touch with someone that can make a decision” can shave points off a credit card rate.

You get the idea, start at home and examine every expense. Start treating your household like a business, expenses are to be examined, cut and justified. Just because our government hasn’t learned that lesson does not mean you have to live that way.