Learn To Be Wisely Frugal But Selectively Extravagant!
Have you ever wondered why so many solid businessman drive
cruddy, old cars from a dingy, run down offices to their
palatial homes in the suburbs? Warren Buffet, perhaps the
greatest investor alive is known for this. The reason they live
this life style is not because they are cheap misers but because
they have a high level of financial intelligence that you can
develop as well.
They understand that if they have $90,000.00 that they could
either put that money into 1. reducing their debt 2. invest it
into the stock market 3. selective home improvements 4. improve
the appearance of their business facilities (I am assuming that
this doesn't have an appreciable impact on their profitability
and believe me it almost never does despite excuse mangers make
to blow money) 5. buy a new Mercedes Benz for themselves 6. buy
their children a new car.
The first two choices increase your net worth (equity) which is
always a good thing and equity is not taxed. The third choice
increases your enjoyment (utility) of your home. If you remodel
your kitchen or bath appropriately you may also increase your
equity. So if you have spare cash in excess of your debts and a
solid investment, savings plan than this can be a good choice as
well.
The fourth and fifth choices are TOTAL wastes of money because
your business sits there for you to suck money out of and
nothing else. A car loses a quarter of its value the moment it
is driven off of the lot and then continues its downward slide
to nothing. Depreciating assets are not investments they are
financially undesirable necessities if you can't walk everywhere
you need to go. An automobile is a financially undesirable
necessity, nothing more, nothing, less.
The very last choice is the worst possible use of your money.
Not only do you waste your money but you also teach and
reinforce financial mismanagement in the minds of your
offspring. Your children learn that they do not have to work for
anything they want. Worse still they will mentally assign a
value to the automobile relative to the amount of effort it took
for them to acquire it and that is zero.
In Steven Silbiger's book "The Jewish Phenomenon" he describes
in other ways why this concept of being prudently frugal yet
selectively extravagant is a major key to the extraordinary
wealth of the Jewish ethnicity. He shows clearly how Jewish
families use this wisdom to convert their income into lasting
wealth. Don't forget that this wisdom is not restricted to Jews
and in fact is the underlying lying cause of financial stability
in high income families of low income ethnicity. The most
enduring wealth of course is a debt free life style with
adequate passive income and the knowledge to recoup it all if
lost.
Dr. Scott Brown a.k.a. "The Wallet Doctor" holds a Ph.D. in
finance from the University of South Carolina and is a professor
of finance at the University of Puerto Rico. Dr. Brown can teach
you how saving the daily price of a cup of coffee at Starbucks
can make you a millionaire in the stock market through long term
stock investing. Dr. Brown's website is:
http://www.walletdoctor.com/