If you expect a rapid and sudden catapult into prosperity then go play the lottery and good luck to you (you’ll need it). Gaining wealth is a slow process and rightly so. If you get it all quickly you have no time to acquire experience and sense. Too quickly and it’ll be all ‘spend, spend, spend’.
Thinking long term is a bit like thinking in very fast motion while the rest of the world moves incredibly slowly around you. ‘Softly, softly catchee monkey’, as they say. Ever tried to swat a fly? A fly’s eyes are different from ours and they basically see in fast forward. By the time you raise your hand, they have already predicted the movement and flown away. You have to develop the same ability. You have to see what’s happening before it happens and the only way to do that is to think long term.
Think of gaining prosperity as stalking a reluctant tiger. It’ll be wary and cautious and you have to stalk it skilfully, quietly, almost lovingly. It’s no use running up and shouting at it – it will either turn round and kill you or run off. Better to take your time and creep up slowly and quietly. Any sudden movements will startle the canny beast.
In The Rules of Work I talked about having various plans in force – short-term, medium-term and long-term. The same is true for investments. You need short-term investments for money you might need access to in the near future; medium-term ones that you expect to deliver returns in five or ten years say; and then you need long-term investments that will reap greater rewards but that deliver in the more distant future.
THINK OF GAINING
PROSPERITY AS STALKING
A RELUCTANT TIGER
I know in Rule 38 I said to be decisive and act quickly, and that is still true. But only after you have taken a long-term view; only after you have weighed and considered and pondered and evaluated. The samurai only makes one cut but that cut was an entire lifetime in the making.
Where are you going to be in five years’ time, prosperity-wise? Ten? Fifteen? Twenty? Longer?
RULE 62
Have a set time of day to work on your wealth strategy
You have to have a life as well as gaining prosperity. It is my observation that happy, wealthy people’s financial planning follows a similar set of four principles:
They set targets then get on with it.
They don’t tinker too much.
They tend to work on their financial planning at the same time of day. (I don’t mean everyone works at say 9am but that each person tends to favour a particular time of day whether it’s 10.30 in the morning or midnight.)
They are able to take a break from their financial planning and have a life outside it – it keeps them refreshed and interesting.
The reason you need a set time of day is twofold. Firstly, it makes sure you actively manage your wealth rather than looking at it once a year and thinking ‘Oh dear’, and conversely it means you don’t overdo it and spend all day tinkering (which as we’ve said is a bad idea). And secondly, it means you can take advantage of your natural biorhythms and put in the effort when you are at your brightest. If you are a morning person, you’ll want to get your planning in early. If you are more of an owl, then an evening slot will take advantage of your sharpest mental acuity.
The other big advantage of having a set time of day is that you can plan for it, work it into your diary and make time for it. If you don’t, it can get forgotten or the time is used for other things. If, for example, you always spend half an hour on your plan first thing after breakfast, then it gets to be a regular function and one you feel oddly uncomfortable missing – yes, even on holiday.
Working on your prosperity plan at the same time of day – and for the same shortish length of time – means you can break things down into manageable chunks and not get overwhelmed. You can work for a bit and then take a break, put it behind you for the day and go back to it, at the same time of course, the next day. Bit by bit, things will improve. Believe me, I’ve been here before you.
BIT BY BIT, THINGS
WILL IMPROVE
RULE 63
Pay attention to detail
This is my biggest failing I’m afraid. My solution is easy. I employ someone to manage my life who takes care of the detail – someone who is very, very good at the detail. Yes, it’s an expensive way to do it. Better to train yourself right from the word go to pay attention to the detail yourself and save the expense.
Detail is not keeping a note of every tiny purchase you make and looking at minute economies – we’ve already discovered (see Rule 35) going without that cappuccino isn’t going to make you rich beyond your wildest dreams. Detail is:
checking the small print
checking the interest rates
checking charges and fees
checking you pay for things on time so you don’t incur penalties
checking when you will be paid and that you invest promptly to avoid your money lying idle
not forgetting people
not forgetting dates, times and appointments
making lists and writing everything down
remembering to ask for information
remembering to ask questions in general
remembering to keep good records of all transactions, purchases and sales.
This is just muscle training. I take it you know all about muscle training? When you are in training for any sport, if you repeat an action often enough your muscles retain the memory of that action. The more you repeat the action the easier it gets and the less effort you need to put in.
It’s a bit like driving a car, tough at first but it becomes automatic (excuse pun!) after a while. I am writing this in France and I have been getting used to (a) driving on the right and (b) driving a left-hand-drive car. I’ve had to concentrate hard and shout at the children because I can’t think if they are beating seven bells out of each other in the back seat. It’s been a bit like learning to drive all over again. Added to the fact that all the signs are in French and it’s a steep learning curve. But it’s getting easier and becoming routine. I don’t have to think about it any more and can take in the passing scenery and enjoy the journey.
TRAIN YOURSELF RIGHT
FROM THE WORD GO TO
PAY ATTENTION TO THE
DETAIL YOURSELF
RULE 64
Create new income streams
When it comes to wealth-creation strategies, investing wisely and managing your money actively are important, but nothing beats having more coming in in the first place. Everybody benefits from some thought about where their income comes from and how they could create another source of revenue.
It’s a bit like being a busker and having several pitches. If one is proving unprofitable, you can pack it in and go somewhere else. But instead of packing it in, what you are going to do is duplicate yourself – a cloned you if you like – and not only carry on busking but also be busking in a new place at the same time. The more hats you have out, the more they are likely to return a profit.
Look, don’t take my word for this. Check it out yourself. Look at any prosperous person you admire and see if diversity isn’t their tool for unlocking greater prosperity. The rich usually have several money-making schemes going for them.
This is especially important for anybody who loves their work, but it doesn’t pay well. What you need is another income stream.
There are a couple of ways of doing this. The first is to turn surplus cash into assets that will work for you and bring in income, even when you aren’t there. Rent from a buy-to-let property would be one example, or annual dividends from shares you’ve bought.
The other way to create new income streams is to find ways of using your skills and expertise in more than one setting, so you aren’t just swapping your labour for a pay check in your day job. This doesn’t mean packing in your day job necessarily. It might mean, for example, doing some freelance work either in the same area or a completely unrelated area where you also have skills and expertise (maybe you have a hobby which means you have ot
her skills and expertise that could be used?). Is there anything you could teach or consult on, or that you could set up as a business?
When I say ‘create’ new income streams, what I mean is create them for you. They can be old ones in the marketplace. Just make sure that you are maximizing all your skills to bring in income, and that you are actively investing in assets that will earn money for you without you having to be there (I do realize you can’t physically clone yourself).
THE RICH USUALLY HAVE
SEVERAL MONEY-MAKING
SCHEMES GOING FOR THEM
RULE 65
Learn to play ‘What if?’
When deciding how to earn your money and how to invest your money, you need to ask yourself a lot of questions starting with ‘What if...?’
I’ll start you off here:
‘What if there is another recession?’
‘What if this bank goes bust and I can’t get my money out?’
‘What if these shares suddenly take a turn for the worse?’
‘What if gold prices plummet?’
‘What if all my customers went elsewhere for a cheaper service/product?’
‘What if I was made redundant?’
‘What if property prices bottom out?’
‘What if the oil runs out?’
The ‘What if’ game is one we can all play. All together now... ‘What if...?’ I call it ‘looking for loopholes’, only it isn’t loopholes, more a sort of gotcha clause. Every time I start making some serious money, I figure someone somewhere is playing a gotcha clause whereby the unexpected happens and that particular income stream dries up rapidly. Part of the fun of being prosperous is in spotting the gotcha clause long before it happens and getting your money out and into another investment. It’s also vital to consider when you are thinking about where to find extra income from. That’s where having lots of hats comes in.
A good example of the dangers of putting all your eggs in one basket are the footballers who have been forced to retire while in their twenties. One minute they are earning millions and seemingly at the peak of their career and then they shatter their ankle, and their financial dreams too. They haven’t trained for anything else because it never occurred to them that they might need another string to their bow.
Diversification is the name of the game – by having more than one income stream, and a nice broad spread of investments, whatever happens in the ‘What if...?’ scenario you will be in a much more secure position than if all your proverbial eggs are in the one basket. By asking ‘What if...?’ you are minimizing risks to your wealth and wealth creation.
DIVERSIFICATION IS THE
NAME OF THE GAME
RULE 66
Control spending impulses
The surest way to scupper your wealth creation is to go out and spend everything you earn or receive (and a bit more just for good measure). This particular addiction is very strong in me. I blame it all on giving up smoking. I have nothing to do now with my hands, so fiddling with a credit card seems to satisfy some deeply buried addictive urge. But you have to resist if you are going to turn what little you have into a bigger something. Forget notions of new cars and holidays in the sun. You are going to turn into a bit of a Scrooge for a while, hanging on to what you’ve got in order to prepare for the future when you will have so much more. This means you have to control your urges.
Look, I’m going to let you into a secret. Prosperity is a race, a prize, a winning line. We all set out wanting to race towards it, claim it. Some can’t be bothered to even make it to the starting line because they are so weighed down with unhelpful beliefs that floor them before they start. And a whole lot of people fall by the wayside from laziness early on. And many more fail to make the grade because they get daunted by the hard work needed. And still more at this point, where you’re at now, stumble because they give into temptation and spend, spend, spend like there is no tomorrow.
Well, there is a tomorrow and it comes quickly enough. And that shiny new car now looks sad and rusty, the holiday is gone with only a few snaps of people and places you can’t even remember, and the new clothes are outgrown and unworn.
The simple truth is the rich know how to control their spending urges – that’s why they’re rich. When they need to tighten their belts they can do it.
And you need to do it too, tighten your belt that is. In fact what you need to do is not loosen it in the first place. We’ve talked about delayed pleasures in earlier Rules and I hope you’ve absorbed that one by now. Curbing those spending urges is absolutely vital and the best way to do it is to never buy anything instantly. If you see something you just have to have, wait a week. Do you still really need/want it? Chances are the urge will pass if you allow it to. Make it harder for yourself by putting time and distance between you and temptation.
THE RICH KNOW HOW TO
CONTROL THEIR SPENDING
URGES – THAT’S WHY
THEY’RE RICH
RULE 67
Don’t answer ads that promise get-rich-quick schemes – it won’t be you who gets rich quick
Last time I typed ‘Opportunities to make money’ into Google I got over 258,000,000 hits. That’s not quite as many as ‘sex’* but still a pretty good indicator of what we want. There are a lot of get-rich-quick schemes in there. Now, believe me, they do work. What? I hear you cry. Yes, indeed they do work. But not for you, not for the poor mugs who sign up. They work for the instigators, the beginners, the ones who launch such schemes.**
In the 1980s there were a lot of water purifier selling schemes about. I was invited to a couple of their meetings and went along out of interest (strictly research I promise) and was amazed at how quick people were to join in, to sign something, anything, that promised them loads of money with minimum effort. After all, what did they have to do but sell a water filter to a few friends and relations? Easy pickings they all thought. Where are all the people now who signed up, invested their savings, were promised untold riches? Funny, I can’t find any either.
Maybe a few did indeed sell some and alienated their loved ones in the process. Maybe there were a few at the beginning who did make quite a bit of money. But any pyramid scheme isn’t sustainable and will collapse once it reaches a certain level because there just aren’t enough people on the planet to sustain the promise.
I like what Woody Allen says about a fool and his money – how did they get together in the first place?***
When I was a kid I remember reading about a couple of scams that set me thinking about how gullible people are. The first was a pest killer. You sent off £5 (it may have been pounds or dollars or whatever) to buy a pest killer guaranteed to kill any household pest including fleas, cockroaches, mice, etc. What you got back were two small blocks of wood with the instruction to catch and place the pest on block A and then press down block B with great force. I kid you not. And the perpetrators made a lot of money before they got caught. Might be time to try that one again. The second scam was someone offering a yard of silk during a silk crisis for a similar small fee (notice how the amount is always small enough to tempt you in) and what you got back was a yard of silk thread – they had never specified the width.
Now you might be thinking you are too clever to be taken in by such obvious hoaxes. Yes? Well, they aren’t all as obvious and you might not believe the schemes that otherwise very smart people sign up to. There are no get-rich-quick schemes. Repeat after me: There are no...
‘A FOOL AND HIS MONEY –
HOW DID THEY GET TOGETHER
IN THE FIRST PLACE?’
* 2,860,000,000 when I Googled ‘sex’ but ‘God’ is up there with 1,640,000,000 and ‘work’ is a staggering 6,210,000,000 so maybe there’s hope for us yet.
** 137,000,000 last time I Googled ‘get-rich-quick schemes’.
*** It may not have been Woody Allen of course – he does get a lot of quotes attributed to him, especially cynical ones about money and God. Woody also said – a
nd it was definitely him this time – that money was better than poverty if only for financial reasons.
RULE 68
There are no secrets
Just as there are no get-rich-quick schemes, so there are no secrets – so don’t go buying any of them either. You will be offered loads. Once your attention is focused on becoming prosperous, all sorts of offers are going to come at you out of the woodwork. And they’ll all offer to let you in on the secrets only the really rich know.
You’ll get offered very expensive newsletters that will tell you the hidden secrets of Wall Street, how to play the Stock Exchange and win, how to invest and make a fortune, how to move your money around in offshore accounts to avoid paying taxes. And it’ll cost you so little! All you’ve got to do is sign up for 12 monthly issues.
Guess what? The only secret being sold is the one that says there’s a mug born every minute. And now you know that secret, you too can just say no. No one but you is going to make you wealthy. No one in the whole wide world. They don’t know more than you. They don’t have access to any more information than you do.
NO ONE BUT YOU IS GOING
TO MAKE YOU WEALTHY.
NO ONE IN THE WHOLE
WIDE WORLD
The secret of making money is that there are no secrets. You buy something and if you sell it for more than you paid, you’ve done well. And that applies to anything and everything in the financial world – stocks and shares and investments and property portfolios and ISAs and budget funds and finance management and commodity futures and FTSE and gold reserves and conch shells.
One of the earliest Rules we had to learn was that only industrious people can be prosperous. Can you see why now? You have to put in a bit of effort to learn how to do it by studying the wealthy. If you think there are shortcuts, like buying get-rich-quick schemes or buying secrets, not only are you going to be disappointed but you’ll be worse off than if you hadn’t invested in such nonsense. Lazy people not only don’t get rich but they often end up poorer because they look for such shortcuts.
The Rules of Wealth Page 10