No Excuses! - The Power of Self-Discipline Part 15

The Reasons for Financial Failure.

The primary reason why most adults have financial problems is not low earnings. In their book The Millionaire Next Door, Thomas Stanley and William Danko show that two families living on the same street, in the same size of house, and working at the same job can have completely different financial situations. By the age of forty-five or fifty, the couple in one house will be financially independent while the couple next door is deeply in debt and having trouble making the minimum payments on their credit cards.

The reason for this is not the amount of money that they earn. The reason is lack of self-discipline and the inability to delay gratification. Why is this weakness of character so prevalent among the majority of adults in society today? It goes back to early childhood.

When you were a child and you received money (whether it was your allowance or a gift from a friend or relative), the first thing you thought of doing was to spend that money on candy. Candy is sweet. Candy is delicious. Candy fills your mouth with a wonderful, sugary flavor. You liked candy when you were a child, and you probably could seldom get enough of it. Many children will eat candy until they become physically ill because it tastes so good.

As you grew older, you developed what psychologists call a "conditioned response" to receiving money from any source. Like Pavlov's dog, when you receive money, you mentally salivate at the thought of spending this money on something that makes you happy, at least temporarily.

Spending Makes You Happy.

When you become an adult and you earn or receive money, this automatic reaction continues. Your first thought is, "How can I spend this money to achieve immediate pleasure?"

When you get your first job, the very first thing you think about is how you can spend not only the money you earn, but also every penny you can borrow on a credit card on clothes, cars, cosmetics, socializing, entertainment, travel, and everything else. Your mental equation is money = enjoyment.

When you go on vacation to a resort of any kind, you find that the hotels and streets are lined with shops selling useless trinkets, bobbles, and trash, plus clothes, artwork, and other items that you would never think of buying at home. Why is this? Simple. When you are on vacation, you feel happy. You have a conditioned response to a.s.sociate happiness with spending money. The happier you are, the more unconsciously compelled you are to go out and spend money on something-or, rather, on anything.

It is quite common for many people, when they are unhappy or frustrated for any reason, to go shopping. They unconsciously a.s.sociate buying something with being happy. When it doesn't work as they expected, they buy something else. Sometimes, unhappy people go on shopping sprees. They buy lots of things they don't particularly need because they unconsciously a.s.sociate spending with happiness.

As an adult, whenever you receive your paycheck, a bonus, a commission, an IRS refund, a prize, or an inheritance, the very first thing you think about is how you can spend this money as quickly as possible and on as many pleasures as possible.

Rewire Your Responses About Money.

The starting point of achieving financial independence is to discipline yourself to rewire your att.i.tude toward money. You need to reach into your subconscious mind and disconnect the wire linking "spending" and "happiness." You need to then reconnect that "happiness" wire to the "saving and investing" wire.

From that moment on, instead of saying, "I feel happy when I spend money," you will say, "I feel happy when I save money."

To reinforce this shift in thinking, open up a "financial freedom account" at your local bank. This is the account in which you deposit money for the long term. Once your money goes into this account, you resolve that you will never spend it on anything except the achievement of financial freedom.

If you want to save money to buy a boat or a car, you open up a separate account solely for that purpose. But your financial freedom account is inviolable. You never touch it except to invest those funds so that they can yield a higher rate of return.

a.s.sociate Happiness with Saving.

When you begin saving in this way, something miraculous happens within you. You start to feel happy about the idea of having money in the bank. Even if you open your account with only $10, this action gives you a feeling of greater self-control and personal power. You feel happier about yourself. The very act of disciplining yourself to save money makes you feel stronger and more in control of your destiny.

Each time you get some extra money, you put it into your financial freedom account. Eventually, your financial freedom account will begin to grow. Then, as it grows, you activate two laws: the Law of Attraction and the Law of Acc.u.mulation.

Because the money in your account is emotionalized by your own thoughts and feelings, it sets up a force field of energy that begins to attract more money into it. If you save $10 a month for a year, you will be astonished to find that with the extra bits of money that you have put into that account, you will probably have more than $200 rather than just $120. If you save $100 per month, you will probably have more than $2,000.

The Law of Acc.u.mulation says that "every great achievement is an acc.u.mulation of many small achievements." The Law of Attraction says that "you attract into your life those things that are in harmony with your dominant thoughts." Because of these laws, your financial freedom account begins to grow with the miracle of compound interest.

The more money you have in your bank account, the more energy it generates and the more money is attracted into your life. You have heard it said that "it takes money to make money." This is true. As you begin to save and acc.u.mulate money, the universe begins to direct more and more money toward you that you can save and acc.u.mulate.

Everyone who has ever practiced this principle of regular saving is absolutely astonished at how quickly their financial fortunes change for the better.

The rule for financial independence, once you have rewired your att.i.tude toward money, is to "pay yourself first." Most people save whatever is left over after their monthly expenses-if there is anything left over at all. The key, however, is to pay yourself first, off the top, from every amount of money you receive.

Save Throughout Your Lifetime.

It used to be that if you saved 10 percent of your income from your first paycheck until you retired, you would be financially independent, if not rich. Today, however, financial advisers suggest that you need to save 15 or 20 percent of your income in order to achieve all your financial goals. Any less than this opens you up to the risk of running out of money later in life.

When we suggest to people that they need to begin saving 10 percent of their incomes, they shake their heads. Most people are spending everything they earn today. They have nothing left over. Most people are deeply in debt as well. The idea of saving 10 percent of their income, right off the top, appears impossible. But there is a solution.

Practice the 1 Percent Formula.

Begin today to save 1 percent of your income and learn to live on the other 99 percent. This is a manageable amount. This is a number that you can get your mind around. It requires only a small amount of self-discipline and delayed gratification for you to save 1 percent each month. If you are earning $3,000 per month, 1 percent is $30 per month, or only $1 per day.

At the end of each day, come home and put your daily amount into a box or jar. Once per month, take your acc.u.mulated savings down to the bank and put it into your financial freedom account. This sounds like a small beginning, but remember that "a journey of a thousand leagues begins with a single step."

In no time at all, you will become comfortable living on 99 percent of your income. At that point, you raise your savings level to 2 percent of your income per month. You then adjust your lifestyle to live on 98 percent. In no time, this will become a habit; you will find it automatic and easy to live on 98 percent of what you earn.

Month by month, you then increase your savings level by 1 percent. By the end of the year, you will probably be saving 10 percent of your income. Then something else remarkable will start to happen. Your debts will start to decline. As you become consciously aware of saving your money and moving toward financial independence, you will become more intelligent and thoughtful about each expenditure. You will find yourself spending less and gradually paying off your debts, month by month.

The Payoff Is Tremendous.

The reward for saving and investing is substantial. It is said that "happiness is the progressive realization of a worthy ideal." So every time you save a dollar or pay off a dollar of indebtedness, you feel happy inside. You feel more positive and in control of your life. Your brain releases endorphins, which in turn give you a feeling of calmness and well-being.

Within two years of beginning this process, you will have worked your way out of debt and will have begun to acc.u.mulate a growing amount of money in your financial freedom account. As this amount increases, you will begin to attract into your life more money and more opportunities to deploy those funds intelligently so that they yield a higher rate of return.

At the same time, your att.i.tude toward money and spending will gradually change. You will become more disciplined and conscientious. You will investigate carefully before you invest. You will study every aspect of a potential business or opportunity. You will be reluctant to part with money that you have worked so hard to acc.u.mulate. You will actually begin to reshape your att.i.tude and personality toward money-and do so in a very positive way.

Income Increases Don't Help.

Sometimes I ask my audiences, "Who here would like to be financially independent?" Everybody raises their hand. So then I ask, "If I could wave a magic wand and double the income of every person in this room, would that help you to become financially independent?"

Everybody cheers and laughs and nods their head, agreeing that if they could miraculously double their income, they could become financially independent.

I then ask them, "How many people in this room, from the time you took your first job to today, have already doubled your income?"

Without hesitation, every hand in the room goes up.

I then ask, "How many people here, from the time you took your first job to today, have increased your income three times? Five times? Ten times?"

Hands go up all over the room. Everyone in the room has doubled or tripled or increased their income five or ten times from the time they took their first job.

I then make my point: "Everyone here has already increased their income dramatically, but it has done no good. Simply increasing your income does not ensure that you will achieve financial independence. This is because of Parkinson's Law, which says, 'Expenditures rise to meet income.' No matter how much you earn, you end up spending it all, and more besides."

Practice the Wedge Principle.

The way to achieve financial independence is for you to break Parkinson's Law. You do this by practicing the "Wedge Principle" for the rest of your life. Here is how you do it: As your income increases in the months and years ahead, drive a wedge between your increasing income and your increasing expenses. Instead of spending it all, resolve that you will save 50 percent of your "increase."

If your income increases by $100 per month, resolve to save $50 per month, off the top, and put it into your financial freedom account. You can spend the other $50 on your family and on improving your lifestyle. But you must resolve to save half of your increase for the rest of your financial life.

When you pay yourself first, saving 10 or 15 percent of your income off the top and then saving 50 percent of your increase for the rest of your career, you will soon achieve financial independence. You will join the top 5 percent of wealthy people in our society. You will never have to worry about money again.

The Miracle of Compound Interest.

Albert Einstein said, "Compound interest is the most powerful force in the universe."

If, from the age of twenty-one until you are sixty-five, you were to save only $100 per month and invest that amount in a mutual fund or index fund that increased an average of 7 to 10 percent per year, you would be worth more than a million dollars. If you were to set up your payroll account so that $100 were automatically deducted and invested for you, you could be sure of becoming one of the wealthiest people in America.

This means that if you are serious about achieving financial independence, the most important single requirement is self-discipline combined with the ability to delay gratification. Your ability to practice self-mastery, self-control, and self-denial throughout your life will not only enable you to achieve all your financial goals, but it will also make you successful and happy in everything else you do.

In the next chapter, we will talk about the key to making almost everything in your life work for you: the use of your time. We all start off in life with lots of time and little money. How you spend your time throughout your adult years largely determines the quality of your life.

Action Exercises:.

1. Make a decision today to take complete control of your financial life, get out of debt, and achieve financial independence.

2. Determine your net worth today. Add up all your a.s.sets, subtract all your debts and liabilities, and calculate the exact number.

3. Set up a separate bank account and begin saving at least 1 percent of your income as you receive it every month or paycheck.

4. Make a list of all your debts and begin paying them off, starting with those carrying the highest interest rates.

5. Calculate the exact amount that you will need to be financially independent at the end of your career and then set this as a goal.

6. Set specific financial acc.u.mulation goals for yourself for each month, quarter, and year for the rest of your life.

7. Practice frugality in spending by putting off and delaying every expenditure you possibly can until you achieve your long-term financial goals.

Chapter 13.

Self-Discipline and Time Management.

"If you do not conquer self, you will be conquered by self."

-NAPOLEON HILL.

There is perhaps no area of your life in which self-discipline is more important than in the way you manage your time. Time management is a core discipline that largely determines the quality of your life. As Peter Drucker said, "You cannot manage time; you can only manage yourself."

Time management is really life management, personal management, management of yourself rather than of time or circ.u.mstances.

Time is perishable; it cannot be saved. Time is irreplaceable; nothing else will do. Time is irretrievable; once it is gone or wasted, you can never get it back. Finally, time is indispensable, especially for accomplishments of any kind. All achievement, all results, all success requires time.