Clark Howard, that empty golf shirt, recently rehashed his same old pablum into yet another book. Its banner reads, “It’s not what you earn, it’s what you save!” This is wrong on so many levels, but the main one is this: there’s a limit to how much you can save. There’s no limit to how much you can earn.
(NOTE for ladies and excessively cultured men: this post continues with a two-paragraph sports analogy. If you hate sports analogies, which Frank Luntz says you do, skip to the subsequent two paragraphs for a comparable analogy about…weight loss! Because everyone knows that women obsess about their weight. Hey, we’re just the messengers. Blame Luntz, the guy who says you’re easy to categorize.)
Most personal finance advice is the equivalent of a baseball manager who obsesses over pitching and defense to the exclusion and detriment of everything else. (Looking at you, Bud Black.) Each runner you allow on base could end up losing the game for you, therefore each is a problem that needs to be rectified. More important is the overarching meta-problem of reducing the number of baserunners you allow in the first place.
Nowhere in this development does anyone ask, “Wouldn’t it give us far more margin for error and make life a lot easier if we, I don’t know, scored some runs?”
Most obese people who make the requisite half-hearted public attempt to improve their bodies concentrate on one thing: minimizing intake. Minimizing for calories, or fat, or carbohydrates, some variable. If I only pare the volume that I swallow down to a workable size, I can turn from spherical into some more streamlined shape.
Again, it’s an obsession with the subtractive side of the ledger, rather than the additive side. The fat people who at least attempt to restrict their diets vastly outweigh (hey-oh!) the fat people who instead concentrate on building up – on powering their bodies by regularly lifting weights and doing cardiovascular exercise.
(Some of you are reading that last sentence and saying, “Well, of course the fat people who obsess on slimming outnumber the ones who focus on building muscle and thus increasing their metabolisms: eventually, the latter won’t be fat.”)
Same goes for your finances. The cacophony of people who can’t shut up about carpooling, repairing holes in clothes and making their own soap is deafening. The message is clear, if flawed: scrimp, or skimp, as much as possible. Do without. Justify every purchase you make. At the very least, you’ll overload yourself with doubt, and opt not to buy the item in question just so you can give your brain a rest.
Do that, and you’ll free up money to…pay your creditors with. Not that you shouldn’t pay your debts, but the goal with this method is zero, null, cipher, nought, ought. Getting out of the negative and staying there.
Here’s a truth that’s so self-evident, tens of millions of people either miss it or are too dumb to act on it: paying bills is a lot easier when you have more money.
Hey, thanks a lot, Control Your Cash. Is water wet?
Strictly for research purposes, we counted 628 coupons in our most recent Sunday paper. Looking at each one and determining whether it’s for something we’d be interested in would have taken about 37 minutes, extrapolating from the few coupons we looked at. It takes considerably longer to cut them out than it does to look at them, which would make this close to a 2-hour ritual every week.
Yet some people swear by it. You saved $47.11 on groceries? Good for you. Every little bit helps, presumably.
Instead of spending 104 hours a year whittling down your grocery bill, try something different. Spend half that much time researching rental properties. They’re there for the asking. Make an offer on a modest little townhome in a refined part of town. Or a 2-bedroom condo in a slightly worse part of town. Find office space in an industrial park – there’s tons of it, everywhere except North Dakota. Finance it and rent it out to someone. Make friends with a realtor and let her do all the legwork. They work on commission, and most are sufficiently motivated to help you find something.
Yes, we’re telling you to take on more debt. Leverageable debt. As we’ve demonstrated again and again, you aren’t going to build wealth on a salary.
Here’s an example. We visited the Multiple Listing Service site for Seattle, Sea.TheMLSOnline.com, and found 13 townhouses that sit on golf courses. The cheapest of these townhouses is a 2-bedroom number that’s listed at $145,000. In case you haven’t been paying attention the last 3 years, it’s something of a buyer’s market. By the way, this research took us less than a minute. If you’re committed to earning money, and willing to spend a little more time, and actually live in the city where you plan to invest, you can find opportunities like this everywhere.
This unit will close at something like $135,000. Thirty-year fixed-rate mortgages are going for around 3.96% right now. Put $27,000 down, and your monthly payments will be $513.12. If you can rent it out for a modest $970 a month, you’ll clear $5400 a year. That’s an enormous return. Yes, a property manager and a home repair warranty will eat up part of that, but you’ll build equity on an asset that will probably grow in value. After all, scarcity is everything: they can’t cram another townhouse onto the 14th fairway. Best of all, your eventual renters are probably comparison shopping for laundry detergent as we speak.
But you didn’t learn “landlordship” in high school or college. They don’t teach that. Instead they teach Scandinavian history and modern dance.
Opportunities are there. You don’t need anything more than middle-school mathematical and English proficiency to take advantage of them, either. Why aren’t you rich?