Income for Life

Better ways to invest $20

I had to stop for gas this morning, and there was something wrong with the card reader at the pump, so I had to go inside. There was one other customer ahead of me, and also only one clerk.

I had to wait behind the guy in front of me, who was busying giving the clerk his lottery numbers. He played everything, every which way. Pick 3, Pick 4, the numbers in this order and that order. I couldn't help but overhear him as he nonchalantly monopolized the clerk's time (and mine).

When he was finally done and it was time to pay, I watched him hand over a $20 bill. Now, I realize that this isn't a ton of money, but my mind got to wandering about how he could have better invested that $20. Had I been interested enough to say something to him, I might have told him:

1. Put that $20 into a savings account. Even with today's pitiful interest rates, he would have made SOMETHING on that $20, and it would have compounded over time.

2. Buy a stock. If it's the risk vs. reward gambling feeling that appeals to this lottery player, how about rolling the dice and seeing what happens on one of these blue-chip stocks that's undervalued because of the economy?

3. Buy a book. Couldn't that $20 be invested into learning something new? What book, you ask? How about "A Thousand Ways to Make a Thousand Dollars." I'm no statistician, but I've read the book and would guess the odds of him learning a way to make some money are far better than the odds of him winning the lottery.

4. Take a workshop. The local community college not far from my house offers all kinds of community eduction seminars and workshops on the weekends, some for less than $20. Anybody can sign up and learn about personal finance, investing and other useful money topics.

5. Pay down debt. The average American carries credit card debt. If you carry a balance on a card with a 13% rate, paying it down would effectively earn you 13% on that $20. It would work the same if you were paying down the principal on a home, car or student loan.

6. Donate to a school. Where I live, the lottery generates money for the education system. If he cut out the middle man and simply donated to a school, he could at least take the deduction on his income taxes.

OK, OK, I'm not here to grandstand about how others should spend their money. And I hope the guy in front of me today hits his numbers and gets a payoff. Odds are, of course, that he won't. I just thought I'd suggest some strategies for that $20 that might be better than buying a lottery ticket and just crossing your fingers!

One last thing about my gas station trip: When the guy walked out the door and it was finally my turn to step up to the counter, the clerk apologized to me for how long it took.

Then she said, "He does that every day." 

Don't get caught simply treading water

I came across this little story recently and wanted to share it. I don't know who the author is, or else I'd give them propert credit.

Shortly after class, an economics student approaches his economics professor and says, "I don't understand this stimulus bill. Can you explain it to me?"

The professor replied, "I don't have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I'll be glad to explain it to you." The student agreed.

 

At the agreed-upon time, the student showed up at the professor's house. The professor stated that the weekend project involved his backyard pool.

 

They both went out back to the pool, and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, "First, go over to the deep end, and fill your bucket with as much water as you can." The student did as he was instructed.

 

The professor then continued, "Follow me over to the shallow end, and then dump all the water from your bucket into it." The student was naturally confused, but did as he was told.

 

The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, "Excuse me, but why are we doing this?"

 

The professor matter-of-factly stated that he was trying to make the shallow end much deeper.

 

The student didn't think the economics professor was serious, but figured that he would find out the real story soon enough. However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad.

 

The student finally replied, "All we're doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you'll really have accomplished is the destruction of what could have been truly productive action!"

 

The professor put down his bucket and replied with a smile,

"Congratulations. You now understand the stimulus bill."

 

Now, we don't have much control over how the government structures a stimulus bill, but I can picture this above story with many average Americans stuck in the middle of the pool treading water, and waiting for something to happen with the pool.

 

I think this is how many are dealing with the economy right now -- they're waiting for something to happen, waiting for someone to do something that will make it improve. You can see it in the stock market, you can see it in the housing market. There's a lot of unproductive doggy-paddling, as people just try to keep their heads above water.

 

But let me say this: There will be fortunes born in this economy. Recessions always bolster those who see opportunity in hard times and take advantage. Those are the ones who aren't waiting for anyone to fill up the pool; they are taking action and swimming.

 

If you think about it, it requires almost as much energy to tread water and go nowhere as it does to swim forward. Doesn't it make sense to use that energy productively, go somewhere and do something? Spend enough unproductive time treading water in one place, and eventually you're going to sink. I don't know about you, but if I'm going to sink, it's going to be while I'm swimming somewhere -- NOT while I'm treading water hoping somebody's going to move buckets of water around in some way that will help me.

 

Don't wait for help with your water. It's time to swim!

If you think you can't, you won't

If you follow me on Twitter, you probably know that a couple of weeks ago, I attended the TED 2009 conference in California. It was the best conference I've ever been to, and I've been to a lot of conferences.

TED is about sharing ideas that can change the world. TED stands for Technology, Entertainment and Design. It started in 1984 and has evolved into a large group of people who want to add value to our world. From the TED website:

"We believe passionately in the power of ideas to change attitudes, lives and ultimately, the world. So we're building a clearing house that offers free knowledge and inspiration from the world's most inspired thinkers, and also a community of curious souls to engage with ideas and each other."

One of the speakers was Bill Gates. I was very impressed with his presentation. So much so that I've included it here.

Gates posed two big questions about the future of our world. In talking about malaria, he asked "How do you stop a deadly disease that's spread by mosuitoes?" He also asks "How do you make a teacher great?"

These are two big issues for Gates and his foundation, and he talked about some ideas for eradicating the problems of disease and lack of education. He also kept saying the same phrase, which struck me as equally as the big questions did.

"I'm an optimist."

Now, I don't know if we as a planet will beat malaria. I don't know if we'll ever get our arms around our education system and make it great. What I DO know is that if we think we can't, we won't. Once you believe you are going to fail, you have failed.

Yet it's pessimism that seems to be the prevailing sentiment these days. Pessimism sells. Outrageous pessimism sales outrageously.

I thought of Gates's "optimist" statement today because I read a headline on a finance blog (I won't name it and give it any more attention) that repeatedly sells sensationalist headlines. Today's was something like "America's standard of living is permanently changed."

In the past on this site, which attracts guest commenters who actually try to outdo each other's outrageous "gloom and doom" statements, I have seen views that are even mildly optimistic about the economy become the object of scorn and ridicule on the blog. When did being an optimist become such a crime?

I'm not an economist, so I don't know if "America's standard of living" has been permanently affected by this recession, but I do know that if convince myself that mine is, then it is. If you believe you are beaten, you are.

For what it's worth, I DO know that the Great Depression didn't permanently ruin American's standard of living. I would say it's improved since then. I know the recession in the early 1970s didn't kill us either. Or the one in the mid '80s. In fact, I would go as far as to say no recession in history has ever permanently affected our standard of living negatively.

So I'm going to choose to ignore yet another blowhard on this negative, sensationalist web site. If you want to believe this recession has beaten you, go ahead. I will place far more credence in what Bill Gates says, and choose, like him, to believe that a cure for malaria IS possible and a superior education system is something we CAN build.

I'm an optimist.

If It's Broke, Rebuild It

I've been reading a book titled"They Went Broke?! -- Bankruptcies and Money Disasters of the Rich and Famous," written by bankruptcy attorney Roland Gary Jones.

I share some of the money lessons we can learn from this book in the March issue of the Income for Life Members-Only Newsletter (Not yet a member? Click here), and some are obvious. Many rich and famous people have proven good at spending money on wasteful things, trusting incompetent or dishonest people with their finances and/or getting into trouble with the IRS or the legal system. All of which can make money evaporate quickly, even if you have a lot of it.

But there was another commonality among some of the big names in the book that can’t be overlooked. Those big names include Conrad Hilton, James Cash "J.C." Penney, R.H. Macy, H.J. Heinz, Henry Ford and Walt Disney, among others. Can you guess what they all had in common?

Each was able to build wealth AFTER going broke at least once.

I read a quote once, and I don’t remember where I read it or who said it, but it went: “If the government took all of the money away from the wealthy people in the world and redistributed it to the poor people, the wealthy people would have all of the money back within a few short years.”

True wealth-builders can do it more than once, and some have had to. Those who learn from their mistakes, self-correct, re-commit themselves and see opportunities can re-build what has been broken down. They do more. They do things differently. They recover.

The lesson seems relevant these days – I’m sure more than a few people have seen their home’s value drop, or, even more probably, seen reduction in job income or the value of their 401k plummet. People will deal with these realities differently. Some will do nothing, complaining that their IRA lost 40 percent of its value, but not taking any steps to recover from it.

But others will put themselves into motion the way true wealth-builders do, even after a big defeat. You can bank on it (no pun intended) – their WILL be fortunes made after this recession. There will be a category made up of folks who will figure out what to do differently, re-commit themselves and earn that money back.

If you have suffered a financial setback in this economy, which of these two categories will you put yourself in?

How to Accomplish Challenging Goals

Post by Rob Minton
Follow Me on Twitter

Today we have a special treat in store for you. I recently interviewed Harry Johnson, who won Bill Phillip's Body for Life Transformation contest in 1998. This interview was focused around how Harry completely transformed his body and you can listen to the entire interview in this blog post!

I realize our blog is about investing and wealth building, but I firmly believe that health and exercise play a key part in our financial lives. Bill Phillips once said, "When you strengthen your body, you strengthen your mind." I believe this is true on many levels.

During this interview, I asked Harry the following questions:

1. What were you searching for when you started your body transformation?

2. What challenges did you have and how did you overcome them?

3. What lessons did you learn about life?

4. What other benefits does someone receive when they eat healthy and exercise?

5. How does exercise help people achieve goals in other areas of their lives?

6. Can you tell us the story on how you won Bill Phillip's challenge?

It was a great interview. There are many lessons for you. You can listen to this entire interview right now by clicking the play button!