Your Wealthy Future

Creating Wealth is a decades long affair. Rarely happens overnight and a quick success can backfire.

A few people win lotto. Instant riches. But a few years later you find former winners in bankruptcy court. They did not know how to keep or invest money. Only how to spend it.

Basics Matter

Spend less than you bring home. 

Save for gifts, vacations, unexpected repairs and layoffs.

Pay off credit cards every month. Losing 18+% interest hurts.

Sign up for your 401K and take the company match minimum. Saving tax deferred your taxes go down more than take home pay.

Have insurance - auto, medical, long term care, renters or homeowners, plus a personal liability policy. Not having insurance can bankrupt you.

Attitude

Fear of Missing Out cause people to pay too much, buy luxuries or take expensive vacations. No one needs a $50,000 wedding. The debt incurred will hurt your relationship.

Diversify your investments. Nobody knows what stocks or bonds will do next. Everyone makes mistakes and have setbacks. Recessions and recoveries happen. Use ETFs - roughly 35% stocks, 55% bonds and 10% precious metals & REITs. 

Drive an uncool car. Cars lose so much value so quickly. Prefer 3-6 year old cars and paying cash. My investment advisor has only owned 4 Toyotas.

Investigate and talk with experienced people before buying. FOMO leads to over paying. Good investors don’t rush decisions, nor join in speculative manias. Bubbles burst and values return to earth quickly.

Real estate is not liquid. If you need to move selling costs are nearly 10%. Don’t buy too big of a home. Make sure the location fits your future plans, then check property is in good condition.

Time

First few years little accumulates in 401K or savings. After ~5 years the returns and dividends start adding up, plus debts are getting paid off. You can see where you are going.

Your mortgage use to be higher than rents. Ten years later less than renting a 2 bedroom apartment. Plus appreciation puts you are ahead.

Learn about subjects one at a time. No one knows everything. Admit you need to know more and ask what seem like foolish questions. If a salesperson is rushing your decision, sleep on it overnight and talk with advisors before buying. 

Your Future

Wealth and savings are desirable because they give you options. Paying for education, buying a home, or investing in a business or real estate. Your future self will be grateful for early sacrifices.

“These are my principles, and if you don’t like them … well, I’ve got others.” - Groucho Marx

Happy 100th Birthday Boeing

The original Pacific Aero Products Company celebrates turning 100 today. Boeing is now a huge international company known worldwide. It was originally a few men who believed they could make better airplanes, and they did. From the original B&W Model 1 to the Clipper to WW2’s B-17 to B-52 to 707’s original jet age to 727 to the iconic 747 to the great F-15 to the amazing C-17 and F-18 to today’s 787, Boeing makes wonderful airplanes.

Boeing is the 3^rd company I have worked for with over 100 years of history. Celebrated Colt Firearms 150^th anniversary, and Sargent and Company dated back to 1864 making builders hardware.

What do these companies have in common?

• ·      Innovate great products and services.
• ·      Look out for their customers & end users. They care.
• ·      Always becoming more productive.
• ·      Adapt and adjust to market conditions.
• ·      Always learning, especially from failures.
• ·      Hire and develop great people.

Boeing has “The Incredibles” who built the first 747 in ~16 months while the factory was built around them. Supervisors would sometimes have to walk people out to their cars and watch them leave to make sure they went home for a break. (You cannot pay for performance like that.)

A lot of people will honor Boeing today and it is well deserved. Boeing people “Enthusiastically Tackle Challenges” through the decades, and do so today.

This is the best company ever worked for. What took me so long to get here?

Financially Impotent Secret Shame of Middle Class Americans

Neal Gabler is a brave man. He writes openly about his own financial troubles in “The Secret Shame of Middle-Class Americans” in the May issue of The Atlantic. 47% of Americans cannot raise $400 for a minor emergency, and Neal is one.

Mind you Neal is a successful writer, publishing 5 books, writing television scripts, and reviewed movies on PBS for 3 years. However being a writer is not a path to riches. Neal admits to making mistakes - his wife quitting work, living in an expensive city, more home than they could afford, sending his children to expensive universities, using a 401K to pay for a wedding. Neal knows borrowing money just to pay bills.

Credit Howard Gold for his commentary on Neal’s article. Howard estimates living the American Dream costs $130,000 a year for a family of four. Only 1 in 8 families earn that much. The median income is $53,657 per the US Census.

The truth is in a global economy incomes have stopped growing. The median family income peaked around $57,000 in 1999. Companies cannot pay as much when other companies sell completive products for less. Compensation has dropped 5% of GDP from 1970 to 2013 per FRED. Our salaries have not kept up (unless you have a high demand profession/skill).

We are uneducated money managers. We spend too much, save too little, and do not manage risk well. Was budgeting ever taught in school? How about picking investments? Look for information on the Internet, and you will find people selling you something. Not always the information you need. Retirees are going from stable pensions to self-managing 401Ks and IRAs. We rely too much on Social Security.

We are no longer getting ahead. Now you know why Donald Trump and Bernie Sanders are so popular. A great Bruce Eric Kaplan’s New Yorker cartoon says it all, “We thought it was a rough patch, but it turned out to be our life.”

Personally have dug out from failing industries, running my own business, real estate investment losses, and returned to manufacturing engineering. Had to move to another state, and my wife has not been able to find work here for 3 years. Most people would think we are lucky. No, it has taken years hard work.

We live frugally, paying off a median priced house, no other debt, save over 20%, and I drive an 18-year-old very used Volvo to work. Probably can’t retire before 70 and would like to work 10-15 years past that.

What can you do? Spend less than you make, pay off debt, increase your savings with every raise, educate yourself, develop more skill, buy insurance, take risks, and develop resilience.

Hard times happen to us all. You can do better.

Read Neal Gabler’s “The Secret Shame of Middle-Class Americans”

Read Howard Gold’s “We’re going broke chasing the American Dream”

Be a Better You

"Be at war with your vices; at peace with your neighbors, and let every New Year find you a better man." - Benjamin Franklin

Everyone would like to improve. Why else do we make New Years resolutions? We want to make more money, get promoted, lose weight or find the love of our life.

Instead of making very general resolutions that will fail in the first weeks, choose what you will succeed at. That is right, you are going to succeed.

How do I know this works? Have done it. Who else do you know planned to lose 10 pounds, and lost 16? Successfully lost weight and kept it off for years.

Lets Get Started

Start writing a list of desires.  Where do you want your life to be better? Get paper now.

Why do you want to improve this part of your life? Write down all the reasons.

What values & beliefs of yours support these ideas/resolutions? Write them down.

What values & beliefs hold you back? If you think wealth makes you an evil and mean, you will sabotage your efforts. Write down the values/beliefs why you can’t do it. Are they true? I really doubt it. There will be difficulties, but nothing you can’t work around or overcome. Your talent and hard work will be rewarded.

Now comes the hard part. Which resolution is no. 1?  You need to put them in order.  Which resolution is most important to your values and actions?

Then you pick. Preferably choose only 1 resolution, but no more than 3. May be one major and a minor one? You choose which goals to succeed at.

Now start planning how you will succeed at your first resolution. What steps are necessary for you to consider your experience a success? What can you start today? Focus on what you control.

Repeat if you are working on a second resolution.

Why It Works

Focusing on a few goals, and creating actions you follow get faster results. The more you value a goal, the harder you will work to succeed at your resolution.

Writing it down is another reason for success. Write the goal as if it has already happened. Write the actions as if the past and you did them already. You mind will follow you.

The results may take longer or be less than expected. Sticking with it gets results.

Results

Weight loss, was it easy? No. Did I fail at times? Yes, of course. But I stuck with it.

Was technically not fat, just at the higher end of my healthy weight range. However was not playing volleyball 4 times a week nor weightlifting. Sitting around let me gain weight. Just did not feel good physically. Motivation included Dad getting Adult Onset Diabetes. Taking care of myself could prevent that.

 My plan was rather simple. I gained weight one pound at a time. Losing it was going to be the same. Skipped the diet and went immediately to a maintenance plan. Less carbs, smaller portions, more exercise, and add some healthy foods. Did not give up any foods I loved, just limited how much I ate them.

Another secret, allowed myself one cheat day per week. Still could go for cake at a birthday, donut on Sunday, or restaurant meal. Spread them out by dieting 6 days a week.

Results: 16 pounds lost in 18 months. You have heard the last 10 pounds is the hardest to lose? That was my whole goal. Weight did not fall off easy. But have maintained the gain 5 years by making a permanent change.

Second did go through unemployment and find a new job while losing weight. Succeeding at one goal supported working towards another goal.

Follow Thru

Lots of people think they have to be perfect to accomplish anything. Not true. Every plan will have setbacks and make adjustments. Your plan must allow for changes, celebrations and vacations.

People think focusing on one or few changes, the other goals will not happen. Truth is by focusing you complete goals faster. Success motivates you to start the other goals expecting to succeed.

Pick your most valuable goal, and write down your plan. Then adapt and adjust your plan until you succeed.

Following this plan myself. Will let you know how I make out. Let me know how your plan worked for you.

A very happy New Year to you, your friends and family.

Savings and Emergency Funds

Your future is hard to imagine. Mine did not unfold the way I thought. Imagined growing up in my hometown and working for one company during my career. After college my hometown was in a local recession and few jobs to be had. Wound up working my first job 300 miles away.  Currently working across the country in my 7^th state.

Man plans, God laughs.

You do not know how well your industry or your company will do over the next 50 years. Layoffs, horrible bosses, and business closings are real possibilities.

No one can predict their health, accidents, children, nor which natural disasters you will face. So what can you do?

Save

Saving is a cornerstone of wealth. If you don’t have money to invest, you can’t earn more except by working more hours or jobs.

Savings give you options if something happens. You can choose investments, education, nicer vacations, good homes, and better schools for your children. If conditions are going down or crime is rising where you live, you can choose to move to a safer place. You can donate to charities doing good work. Savings are a form of freedom.

Started my current job after being out of work for most of one and a half years. My savings were not very much after being self-employed for six years. Had about $15,000 in savings, an old $3,000 car and no debt.

Five years later have $60,000 in the bank, $85,000 grand in my 401k, and own a house with $100,000 in equity. How did we do it? We did not win the lottery.

Pay Yourself First

Save at least the matching 401k funds your company offers from the start. Do not give up free money and with the tax deduction this will only take a small amount from your take home pay. To get to the maximum am now putting in the 401k I increased my contribution with every raise. You don’t miss the extra money if you don’t see.

Set up a separate credit union savings account for my emergency fund. That $3,000 car could break any time and will not run forever. Put more than a car payment every paycheck in this fund to create an emergency fund. The good news is have over one year's expenses and will pay cash for my next car.

Live Within Your Means

Know how much my monthly expenses are and pay them. Pay my credit card bill in full every month.

The rent was not late nor is the mortgage. Actually refinanced a 30-year mortgage to a 15-year mortgage at a lower rate and pay extra principle every month.

We keep monthly expenses low, don’t eat out every weekend and pick affordable restaurants we like. Don’t have all the movie channels, nor the fastest Internet. (Okay added the sports channels because can afford them)

We plan our big purchases and don’t impulse spend. My wife is a tremendous negotiator and will walk away if the price is not right. My last cell phone physically wore out being 7-8 years old. The smart phone has the lowest monthly payments and was paid for by overtime.

Choose Where You Spend

Got prequalified for a mortgage and was surprised how much could borrow. Did I look for a house in that range? No, my wife and I do not need a big house for two. Looked at neighborhoods that fit my commuting, good schools and safe/low crime rates. Aimed for the median price range 40% below what could borrow. (No one says you have to be in debt your whole life) Looked at almost 100 houses before buying a short sale, waiting 6 months to close. Have the smallest house in a very nice neighborhood, cleaned up the dirtiest house and painted. Now just paying off the mortgage.

Yes still driving the $3,000 car. My wife has a good car and mine goes to work to sit outside all day. How nice of a car do I need for 8 miles? It is mechanically sound, maintained and the interior is falling apart. Including repairs have spent ~$1,200 per year.

Realism

Have a good paying career, but am in a boom and bust industry. Median price houses sell faster than the expensive houses. Not having debt lets me go where the work is.

My investments are diversified, low cost and fairly conservative. When someone promises high returns they are likely taking high risks or lying. (See Bernie Madoff)

Have good health, auto, homeowners, and long term care insurance. In addition funding a small annuity to afford retirement with Social Security. Will not have to touch the savings for many years.

Summary

Being responsible you may not be the wild friend with the fancy home, latest gadgets and crazy expenses. You will not be the homeless person either by learning how to save and invest. Being able to help others is a blessing you won’t forget either. Life is good.

How to Build Wealth

Been studying business, successful people and failures for years. It is an interesting and enlightening hobby. Frankly have learned a lot that schools never teach you. A large part of my life is unlearning what I was taught. Let me share one insight today.

First step if you really want to be wealthy. READ. A lot.

Bill Gates of Microsoft and The Bill and Melinda Gates Foundation has put out a couple list of books to read. Bill curated these list for us. He may have read 50 to 200 books this year to recommend 5 - 10 books for us.

http://www.marketwatch.com/story/heres-bill-gates-2015-summer-reading-list-2015-05-19

Warren Buffet and Charlie Munger of Berkshire Hathaway have created fortunes by buying and investing in well-run businesses. It is not as easy as it looks.

So how do Warren and Charlie spend their days? They read about 5 - 6 hours per day at the office. Charlie’s children joke he is a book with legs. Warren says it is good they work in different states because they would be talking all day about what they read.

Elon Musk has started several successful businesses Pay Pal, Tesla, SpaceX among others. He is the real life example for the Tony Stark character in the movie Iron Man. “You don’t know what you don’t know. You realize there are all these things out there.” Musk says.

http://www.marketwatch.com/story/how-to-be-elon-musk-10-secrets-of-the-craziest-billionaire-2015-06-10

The average Fortune 500 CEO reads about 50 books a year. Rick Warren often reads one book a day. There is usually a reason successful people have a common habits.

“The basic law of wealth creation: principle of asymmetric knowledge – that is, any situation when somebody in a market knows something that nobody else in the market knows, and then has the courage to act on that knowledge.”

- Dr. Jules Goddard

If you want to create wealth, learn by reading. Then take action.

Thankfulness and True Wealth

Reflective mood being Thanksgiving and a year older today.  Just want to share a thought.

The world struggles because the focus is wrong. The president, congress and the Federal Reserve have it wrong. They think wealth is created by adding liquidity to the economy.  QE has not made the economy grow or most people wealthier.

True wealth is created by helping other people. Washing machines improved people’s lives and freed up time to spend with family. Airplanes let us visit each other all over the world. Microwaves heat our food.

Bank’s being able to loan more debt? How has that improved the world? Finance is not as important as building something, no matter how small.

True wealth to most people is being able to share time with family and friends on a holiday. Charity, volunteering and doing good are the best examples of sharing real wealth.

So what am I thankful for today?

Being able to serve coffee and Danishes at church this morning. May even wash some dishes.

Friends and family who are fighting and beating cancer. Their struggles inspire and show the goodness of people/strangers helping them.

Being able to read inspiring thoughts from other writers encouraging us to be a little bit better every day. Not only the famous like Reverend’s Schuler & Olsteen, but friends like Reverend’s Steve Cuff and James Richards teaching faith.

The few words of peace, love and understanding I am able to share. Example my chapter redefining success not as money earned, bur raising good kids as more important. The words may be read by only a few people, but they will reach someone who needs them.

All the engineers I have been able to teach this year how to be better engineers. Always learn something when I teach.

It is not the gifts or possessions that make me thankful today. It is the life I get to share. Please share some of your blessing today and enjoy today. Lets build real wealth.