Thursday, April 17, 2008

The Secret to Financial Success

Many people have the view that finances and investing is some kind of mystical puzzle that once solved will instantly eliminate all their financial troubles. The code will be broken and the chest of gold will fly open (just watch any late night infomercial). In my opinion the notion of a financial quick fix is the most dangerous and damaging perspective that anyone can have. Having this view effectively removes individuals from their current financial problems. It rationalizes the belief that you don’t have to diligently and effectively manage your money because once you figure the secret out everything will be OK.

In my opinion the real secret to financial success is the realization that there is no secret, and that for 99.99% of the population (myself included) there is no formula or secret that is instantly going to solve all your financial problems. The real secret to financial success can be found by following these 3 easy steps:

1. Spend less money than you make.
2. Invest your saved money.
3. Repeat 1 and 2 until you can retire.

Well the secret is out...that’s really all there is to it.

20 comments:

MG said...

So true, great post!

SJH said...

How does one save more than they make? I think you mean save a portion of what you make.

Middle Class Millionaire said...

sjh,
You're right, my typo, thanks for letting me know (it's fixed now)

mg,
thanks for knowing what I mean't anyways....

Big Cajun Man said...

So how do I spend less than I make? That would mean NOT buying things that I want? You can't mean that! What if I want to buy something and I don't have enough money to buy it?

This saved money, can't I just borrow money and put it in my savings?

(what is the sarcasm font?)
--C8j

dividenddollar said...

So simple and so true!

jhantu said...

this is an off topic query, but still i will give it a shot.. pfe being one of your core holdings how do you see the stock to fare given ts diminishing pipelines, expiry of eclusive patents between 2010-2012?

wkg said...

Interesting post

It compels me to share something that I experienced when I had just begun my working career. I was working for an oil company at the time and an older person that I had been working with had been having some health problems, and was not able to work anymore. He was in his late fifties and had always spent whatever he made, assuming that because he made a good wage, the company that he was working for was looking after his pension. I was with him when he recieved the pension statement that detailed what he was going to be getting as a monthly pension. It was not even close to the amount that he needed to live on, and I remember vividly that it was all that he could do to not completely break down in front of everyone present. That was a hard thing to see, but a very valuable lesson. At that time, I decided that it would never happen to me. I am now 43 and could have retired two years ago. My criteria for being able to retire was that I replace my complete wage with investment income only. I have only invested in land and the stock market ( I do not invest in bonds). I have really taken some hard hits in this period of time, but kept going. There are some absolute truths that I have learned in this time. 1. No one cares that your finacial house is in order but you. 2.You never create wealth working for a wage 3.Return is proportionate to risk. You cannot create wealth without risk. That risk can be managed. 4.The biggest loses that I have incurred have been from not selling a losing investment soon enough. 5. The stock market is not a level playing field. If you expect that there is a lot of misrepresentation and fraud in it, you will not be disappointed. 6. Spend less than you earn.
Cheers

MG said...

great comment there from wkg..that comment is worth a post in itself...

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