by Marc Fisher
CHAPTER 12
THE LAZY MILLIONAIRE TRACKS MINOR,
INVISIBLE EXPENSES
Last week, I was surprised when Michel, the owner of the local convenience store, asked a customer $8 for a pack of cigarettes … (It is Canadian prices, of course!)
I have never smoked, because I have never had the means or the health!
“$8 is quite a lot of money!” I said, after the customer left with his cigarettes in hand.
“There’s a couple that used to come in here every morning and buy 2 packs because each of them smoked a pack a day,” Michel explained.
“They don’t come any more?”
“No, they still come, but they stopped smoking a year ago!”
A wise decision, I thought, which enabled them to save $480 per month. (30 times $16 = $480)
$480 per month is a car payment, or a small mortgage…
“Look,” announced my friend the convenience store owner. “Here they are now! Speak of the devil.…”
They recognized me, and congratulated me on my books, which they said they loved, and added: “We would like to invest in real estate like you suggest, but we don’t have any money. Do you have any tips for us?”
“But you stopped smoking a year ago.”
“How did you know that?”
“Michel told me.”
“Ah.”
“So because you were spending approximately $16 per day, you are saving $480 per month, which translates into approximately $5,000. With this $5,000, you could definitely buy a small property using the wise financing techniques that I suggest.”
“But we don’t have the $5,000!”
I never doubted it, but I just wanted to be sure.
The $5,000 that they saved from not smoking vaporized —in fact, it went up in smoke without them even realizing it!
It’s like a set of communicating vessels.
Or a river that is off course, but that runs anyway, only in a different direction!
And it runs in a different direction because it follows another of Parkinson’s laws, which says:
“EXPENSES ALWAYS INCREASE IN A MANNER THAT IS DIRECTLY PROPORTIONATE TO REVENUES.”
It’s scary, but it’s true!
Think about your own life as an example…
When you were young, you had a low salary, a small car, and a small apartment.
Now that you are “successful,” so to speak, you have a higher salary, a bigger car, and a larger apartment or a house.
But because you have a higher salary, you pay higher taxes.
Because you have a higher salary, credit card companies rush to give you a higher credit limit, which you have maxed out, which has in turn placed the bank at your disposal because of your higher salary!
As a result, you are probably more in debt, and therefore poorer than when you had a lower salary!
Ironic, isn’t it?
Yes, like most people (with the exception of lazy millionaires!) the exsmokers from the convenience store deleted one expense (a pointless and harmful expense) and replaced it with another expense, and so effectively lost track of the $5,000 that their smoking habit cost them previously, but no longer costs them.
$5,000 per year in cigarettes…
It’s still money…
Of course, you might say that not everyone smokes and spends $400 on cigarettes every month…
True enough, but if you analyze your other monthly expenses, you may notice that they are filled with “invisible” leaks.
Here is another example:
My friend Michel at the convenience store —him again! —told me that many people spend $20 on lottery tickets every week. That’s $80 per month, or close to $1,000 per year, in general, the lottery does not pay the player, which explains the overwhelming profits of all of the world’s lotteries!
What’s more, he tells me, when he gives them their $2 or $3 change, customers often say: “Give me a lottery ticket instead.”
More invisible expenses…
Here are some other examples of these small daily expenses that look like nothing, but that represent large amounts over time …
To stay healthy, it is important to drink a lot of water. For several years, I religiously bought a litre of water for $1.50, which represented a good investment in my health.
(Let me add that we find gas expensive until we pay a lot more for a litre of water —a litre of gas costs approximately one dollar)!
So for me, one litre of water was costing me approximately $45 per month.
My wife did the same thing, so it was actually costing us approximately $100 per month.
Then I realized that, by investing $150 in a home water dispenser, it would only cost me $5 for an 18-litre container!
18 litres, which used to cost me $27, now costs me $5…
It’s also better for the environment, because I reuse the same plastic bottle, which I fill myself every morning!
An additional benefit.
Several years ago, at the end of one fiscal year, my accountant revealed to me another one of my invisible expenses by asking me the following question: “Do you know how much you spent in tickets this year?”
“No…”
“$2,100”
I felt sick.
$2,100
That’s real money!
At one time in my life, I had the bad habit of believing in my luck (a frequent quirk shared by lazy millionaires!), and telling myself that I would never get tickets: to the extent that I never paid for parking or put coins in parking meters.
The outcome of my blatant disregard was that, at least twice per month, I would receive a ticket. Usually, the fine was only $30, but because I stupidly neglected to pay them on time, they increased, and with the penalties and administrative costs, they rose to the outrageous amount of $85!
So I paid them.
Twice per month, on average, which meant $170.
Multiplied by 12, that’s $2,040…
Of course, my company paid the fines (we will see the benefits of running a company in a later chapter), but it was still sickening!
From that day on, I started to feed my parking metres, and to use commercial parking lots.
It cost me money, but a lot less than $2,040 per year…
Take a look at your credit cards.
If you owe $10,000 at a rate of 18%, which is the normal rate charged by most companies, you are spending $1,800.
Furthermore, in order to be able to pay this $1,800, you have to have earned nearly double that amount, or $3,600…
You might want to consider a small consolidation loan with your bank, which might give you a line of credit at 8%. That’s a precious $1,000 saved…
I know, I might sound like a fanatic with all these calculations. These savings may seem petty, but when you add them together, they can have a spectacular effect in the long term…
Take a look at them in your own life, and see how you can save without depriving yourself.
Now let’s look at how you can get started, with invisible savings, to put aside a very visible nest egg!
CHAPTER 13
THE LAZY MILLIONAIRE SAVES
WITHOUT SUFFERING!
Take some goldfish and put them in a pond.
Gold fish that are all approximately the same size.
I did say approximately the same size.
This nuance is paramount, as you will see…
You will see because, if you let a few months go by, a few hot summer months, when you come to look at your goldfish in the fall, you will see that they have undergone a miraculous transformation…
Miraculous because you aren’t familiar with the law that I am about to reveal to you…
Yes, you will notice that, even if the goldfish were all approximately the same size at the outset, those that were just a little bit bigger have become MONSTROUSLY HUGE in comparison with their peers.
Who are no longer their peers.
Why does this happ
en?
Because the tiny difference in size meant that they could swim a little faster than their companions.
It also means that their mouths were a little bigger…
And these two small advantages combined allowed them to consume an astonishingly larger quantity of food than their rivals in the great race of life…
Which is why they grew to be so big!
That is also why you should never turn your nose up at small gains —the small investments and savings that you make daily —because over the months and years, they can help you to become the biggest fish in the pond!
Or in any case, a bigger fish than those who don’t use this approach. Obviously, the earlier in your life you start to practice the virtues of saving (and investment, of course!), the faster you will free yourself from the tyranny of work in order to become a lazy millionaire.
Remind yourself that it is never too late to start.
Why?
Because in most developed countries, longevity increases each year.
So even if you start to save when you’re 40 or 50 years old, this is excellent, because there is a chance that you will live to be 80, 90, or even 100 years old!
If you are 20 years old today, you will probably live to be 100, and those who are born in 2006 will probably live to be 125!
However, I must add this proviso: if obesity and sedentary lifestyles continue to prevail in the new generation, it may not live as long as ours!
At first sight, this may be a relief to the government, who will not have to pay old-age pensions for quite so long… But —and there is always a “but,” and this is a big fat one, so to speak —obesity causes nearly 1/2 of all diseases (diabetes, heart disease, cancer, rheumatism, stroke, etc.), and therefore, it will cause healthcare costs to explode. This is the equivalent of squaring the circle for governments, who lose either way!
But let’s return to our more optimistic scenario, in which people, who are suddenly hit by the good sense to eat less and exercise more, will live longer.
How is longevity such as this possible?
Thanks to the progress in medicine and technology, which will be able to replace your entire body!
Heart, kidneys, eyes, hair, skin, hips: these are already replaceable. But we’ll go even further.
They’ll be able to replace your limbs, your sex organs, the most important of which is your brain.
They’ll insert a chip into one of your lobes that will provide you with as much memory as the most powerful computer in the world!
Another chip will be inserted to relieve the trembling caused by Parkinson’s disease (this has already been invented).
A small manufacturing plant will be surgically attached, producing a constant supply of antibodies to prevent the assault of cancer by destroying precancerous cells…
A Prozac plant will be added to regulate your moods…
Another will fight bad cholesterol, and will clean your blood every day, just like filtration plants purify the water you drink…
A computer that is linked to your doctor’s network will be implanted (or worn on your wrist) that will constantly monitor your heart rate, your blood pressure, and the condition of your arteries and organs, and your doctor will know everything about you and the state of your health, without a visit…
In reality, if you were Indiana Jones, once you reach a certain age (advanced) you would be nothing more than the mere memory of Indiana Jones!
Nearly everything that you were born with will have been replaced. Except for your genetic code, which may have been modified at your request… or at the request of your spouse, who wants to pass on a better genetic heritage to her progeny.
(To learn more about this fascinating futuristic scenario, read Eirik Newth’s book A Brief History of the Future).
But of course…
These changes will cost money.
A lot of money.
Those who do not want to die will have to… pay!
From their own pockets.
In fact, the future has already begun.
It’s called two-tiered medicine.
This is a friendly euphemism that hides what it really is, and what it will continue to thrive as: medicine for two budgets!
What will people do if they are not lazy millionaires, or ordinary millionaires, or “middle class,” as they are referred to?
I have to ask myself that question.
It’s up to you, and not the government, which is already in debt over its head, to take the necessary measures to protect your future.
And to do it at an age where you are energetic, imaginative, and bold enough to generate sufficient revenue to invest and to save.
Some people, instead of making an effort to increase their revenue and to strive for financial independence as quickly as possible, give into the popular trend called voluntary simplicity.
To put it simply, they would rather tighten their belts, reduce their expenses, or “downsize,” to use a buzzword, instead of working harder to generate more revenue.
Yesterday, I saw a young, forty-something bachelorette on television who was living, by choice, in a small one-and-a-half, and who bragged about working part-time in order to be able to enjoy life. Good for her! But when she is 60 or 70, and possibly ill, and may have lost her part-time job, and has not put any savings aside, will she still like her situation and brag about it, or will she bitterly regret the folly of her youth? Will she still be able to “enjoy life,” or will she be forced to live at the mercy of a government that is increasingly less generous?
In the game of money, there are two approaches: defence and offence.
Defence means saving, living below your means…
In baseball, they say: “Pitching is the name of the game…”
If you don’t have good pitching, you don’t win.
The same applies in hockey: no team can aspire to be the greatest, which means winning the Stanley Cup, unless it has a great goaltender.
It’s great to score 5 goals, but if your goalie lets in 6, you still lose…
The same is true with money: if you earn $300,000, but you spend $400,000, you have a problem!
This is the problem with voluntary simplicity.
The defence is impressive, but the offence is defective.
It’s true that it is possible to reduce our needs (especially if they are artificial), and to do without a luxury vehicle, or even any vehicle at all, to sacrifice our second home, to keep our primary residence to a minimum (like the forty-something young lady in my example), to eliminate restaurants, nice clothes, golf, travel, and all forms of fun…
In a word, it is possible to be ultra-defensive.
But choosing voluntary simplicity also means immediately renouncing all plans to take exotic vacations, to buy a Nikon, to see a show on Broadway, to visit Tokyo, Venice, Rio de Janeiro, or Moscow…
Isn’t that’s a little discouraging?
Your little pad is nice, and you say you have everything, but still…
What concerns me most with this philosophy is the long-term consequences: because you use every dollar to live or “get by,” and you are not able to put much, if anything, aside.
Woody Allen said: “Eternity is really long, especially near the end.”
Voluntary simplicity enthusiasts would probably say, in their final stretch of life: “Retirement is really long… especially near the end!”
Especially if it lasts 20, or 30, or even 40 years, and old-age pensions gradually disappear like the grin of the Cheshire cat.
The lazy millionaire constantly strives to work on his defence and on his offence, but in a balanced way.
In terms of defence, he is particularly attentive to the stunning virtues of savings…
I was recently chatting with a long-time friend, who has a terrible weight problem.
I told him: “Maurice, you should look at it this way. Life is suffering, as the Buddhists say. But that’s good news if you look at it
the right way.”
‘What?”
“Let me explain.”
“I’m listening.”
“You know that you will suffer one way or another. But you have the choice about how and when.”
“What?”
“It’s simple. In fact, it’s even mathematical… You can choose to suffer immediately, by forcing yourself to go on a diet and to exercise; or you can choose to suffer later, but without being able to choose the exact moment, by continuing to do what you’re doing, and inevitably getting sick. What’s more, you risk being in a lot more pain. Think about it. It’s your choice.” Fast and constant savings, and investment, is the lazy millionaire’s hygiene. It’s his diet, his daily gymnastics. This is his voluntary suffering in order to ensure that he does not suffer later, and to maintain good financial health.
I know, there are some people who say: “I don’t want to save anything. Saving is for the cautious and for old people. I want to live for today, make the most of it, and spend everything I earn. After all, I might get killed crossing the street in three years, so why deprive myself?”
The problem is that they don’t die in three years! They survive.
It reminds me of people who smoke.
You tell them (and they’ve already heard it a thousand times): “You shouldn’t smoke, it’s bad for your lungs and your heart, and it has been proven that it causes cancer.”
They say: “My grandfather smoked, and he died when he was 95!”
“But every year, thousands of people die from smoking well before they turn 90, and even second-hand smoke is dangerous.”
“Well, everyone has to die from something!”
I agree with them.
Everyone has to die from something.
But what these people forget is that, during the final ten or fifteen years of their lives, many of them will suffer from emphysema, or will undergo a procedure to remove their larynx because of cancer, and will have a hole in their throat in order to be able to speak at all.
And they might figure out that they were not quite so smart: they forgot that dying from something is one thing, because dying is inevitable, but being sick for ten or fifteen years because they smoked like a chimney is another thing that could have been avoided, and something that is certainly not pleasant.