Robert G. Yetman, Jr.

Cutting Back is Good, but Making More is Better

Because we’re still fresh into 2011, the financial advice about how to make this your best year yet is still pouring in.  As is always the case, much of the "wisdom" is predicated on the idea that the way to shore up financial stability is by cutting expenses.  Just the other day, I read a fresh article in a well-known online financial publication that essentially stated that the key to success lies in doing things like bringing your lunch to work instead of eating out, cutting your own lawn instead of using a service, buying generic products instead of name brands, and making other similar kinds of efforts.

Unfortunately, for those who have a real and significant cash flow problem, either they have already done those things and are still struggling, or making those sorts of changes will not be impactful at the level they require in order to get on the right track.  One of the problems with focusing so much on cutting expenses as a means to financial viability is that there is only so much you can realistically cut.  The family of four earning $40,000 per year is already, it’s safe to assume, living without much by way of luxuries, so how much more can a family like that really do without and still survive?

Another problem with cutting back is that it’s generally unpleasant.  Even if you steeled yourself to making do with next to nothing, the result is a chronically distasteful lifestyle that makes the sound of the morning alarm little more than the starting gun to a depressing day.  I’m not talking about for the person who may be eating out five nights a week and is now facing the “painful” prospect of eating out only two; I’m talking about for the person who has already made eating out entirely a thing of the past, never takes any sort of vacation, no longer even goes to the movies, and for whom cutting back further might mean eliminating basic cable TV, dumping some forms of insurance coverage, or actually modifying diets so that less food needs to be purchased at the grocery store.

Frustratingly, family financial planning and budgeting seem to focus way too much on the idea of living within your current means, and far too little on increasing family inflow.  Of course a family should cut where they can if they are struggling, and of course people should live not only within, but well within their means, but how about paying some real attention to increasing those means?  The good news to that end is that in this day and age where people with a phone and a computer can fashion professional offices from a spare bedroom, there is more and more legitimate opportunity to actually work another job right from home, thereby lessening the strain on family relations that working multiple jobs invariably produces.  One great opportunity there is in the area of Internet marketing, and some tools to be successful at that can be found at Christian Internet Income (www.christianinternetincome.com). 

In the end, the efforts at increasing your income by working more at your present job or taking a second (or even third) job will surely compromise your available recreational time, but when you do have some, you’ll actually have the ability to enjoy it.  By attacking cash flow problems solely by cutting expenses will mean that while you might have more time, there’s nothing you can afford to do with it except sit in one place with the lights out…and what kind of life is that? 

Agree or disagree; please register your comments below.

Follow me on Twitter at www.twitter.com/robertyetman.

Follow me on Christian Chirp at www.christianchirp.com/robertyetman. 

Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc; www.investorspassport.com)  and the unarmed combat training DVD Thunderstrikes - How to Develop One Shot, One Kill Striking Power (Paladin Press; www.mikereevesonline.com).

Tags: budgeting,+saving+money

Another Great Story About the Only Real Way to Ensure Financial Freedom

Bankrate, Inc. (www.bankrate.com) blogger Jennie Phipps recently told us about a pretty neat guy named Leonard McCracken.  Mr. McCracken is 107 years old, but it’s not merely his long life, impressive though it is, that makes him a worthwhile subject for an article.  Turns out that not only is Leonard McCracken well over 100, he’s been retired since he turned 65; that was back in 1969.  Again, not bad at all, but that’s not the really outstanding part.  The outstanding part is that Leonard McCracken, 107 years old, retired for the last 41 years, and a man who never made more than $10,000 per year when he was a working man, has subsisted during all of his retirement years on a combination of savings, Social Security, and an annuity he purchased many, many moons ago.

Once again, we have another story about someone who was raised in a different time, with different values, with different notions about spending and saving from what more recent generations have harbored, who is able to survive just fine as a retired person for several decades after he hung up his work clothes once and for all.

The overriding theme in these tales is always the same: live within your means…but not merely within your means - you have to be willing to live so far beneath them that it often hurts.  McCracken cites a lifelong devotion to thrift stores and second-hand everything as a big part of why he has been able to pull off his feat, but we also see that investing is a big part of the formula for success, as well.  When you live well below your means, you will have positive cash flow, and when you have positive cash flow, the smart thing to do is to put it into asset classes that have a demonstrated record of growing over the long term.

McCracken has also touted avoidance of the stock market as a big part of his success (his investment of choice has principally been real estate), and while I don’t wholly agree with everything he suggests, including that, I don’t allow the differences to shift my focus away from the larger, very-valuable message: Work hard, save like crazy, and live in a way that allows you to save a large portion of what you earn to have available later when you can no longer work.  We’ve heard the message before, but given that some consumers are starting to re-adopt some of their pre-economic collapse spending habits, it’s probably a message we cannot hear too often.

Agree or disagree; please register your comments below.

Follow me on Twitter at www.twitter.com/robertyetman.

Follow me on Christian Chirp at www.christianchirp.com/robertyetman. 

Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc; www.investorspassport.com)  and the unarmed combat training DVD Thunderstrikes - How to Develop One Shot, One Kill Striking Power (Paladin Press; www.mikereevesonline.com).

Tags: saving+for+retirement

Complexity Need Not Be a Component of Financial Success

When others learn that I maintain a bit of an “alter ego” existence as a fitness trainer, many will waste no time asking about the best way to lose weight; when I immediately shoot back with “By sticking to a good diet and exercising regularly,” that response is often greeted with a dismissive look.  In fact, I now deliver that line with sort of a smirk, anticipating the eye-rolling I’ll get in return.  Tried and true ways of doing things are not exciting, and people are too often looking for something that’s clever – they want the “secret.”

Just as there is no trick to weight loss, there is no trick to growing your net worth.  It is a matter of spending less than you make, and using that difference to both pay down any existing debts you have, as well as investing in assets that have a real chance to appreciate, like securities, real estate, small businesses, and the like.  The good news part of that is that life can remain simple as you pursue your financial goals; the bad news is that, alas, you have to face up to the realization that there is no trick, no magic bullet…and no complex component to which you can affix blame if you fail.  

Despite all of the stock market’s more-recent painful gyrations, the benchmark S&P 500 has recovered, at this writing, to a point where it’s about 20 percent below its all-time high reached in 2007.  20 percent down from that time is not an insignificant level of devaluation, but it’s hardly indicative of the stock market collapse toward which many were convinced we were headed just a couple of years ago.  What does the current state of affairs tell you?  In part, it tells you that if you maintain a diversified portfolio of mutual funds in an IRA, 401(k), or some other long-term retirement account, and you add to it regularly, that doing so is still a pretty good idea.  Same thing with paying down debt; apply a sum each month to a targeted obligation that you can whittle away systematically.  It’s not clever, it’s not sexy; it’s just effective.

I’ve heard it said that when someone gripes that “things are complicated,” the truth is that this person is unwilling to see “things” as simply and as clearly as they can be seen.  I’m convinced that many of us actually like it when “things” are complicated, because it makes it easier to contrive excuses when we fail.  People are free to play whatever mind games they want on themselves, but you cannot escape reality, and the reality is that countless numbers of people continue to achieve financial stability and independence doing nothing more than the simple things that have always worked over the long term.   

Agree or disagree; please register your comments below.

Follow me on Twitter at www.twitter.com/robertyetman.

Follow me on Christian Chirp at www.christianchirp.com/robertyetman. 

Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc; www.investorspassport.com)  and the unarmed combat training DVD Thunderstrikes - How to Develop One Shot, One Kill Striking Power (Paladin Press; www.mikereevesonline.com).     

Tags: financial+planning, how+to+create+a+financial+plan