The Richer or Poorer Question

Today’s article is taken from Chapter 1 “The Richer or Poorer Question – What Are Your Financial Goals?” from my book Messages From the Money Masters.

Smart investors and good money managers always ask themselves this question: 

“Will I be richer or poorer tomorrow if I make this financial commitment today?”

Oftentimes the answer is obvious, but other times it’s not. The secret of asking this question is, if you listen to your answers they can tell you what your goals are, or if you really have no specific financial or life goals. 

Ask yourself, “Will I be richer or poorer if I ____”

• Buy a Mercedes (or another expensive new car)
• Go to Graduate School or back to college
• Sell my business
• Start a business
• Open a savings account
• Start an IRA or a 401K
• Get serious about learning how to manage my money
• Get married
• Have kids
• Get divorced
• Buy a condo
• Give up golf, or take up golf
• Eat more (or less) fast food
• Drop $50 on dinner and drinks
• Stop smoking
• Pack my lunch
• Make coffee at work rather than buy coffee on the way to work

The fact is, every decision we make, or don’t make, no matter how large or how small, ultimately makes us richer or poorer. It’s not just the big decisions, like a new car, a new house, or a change in jobs. Our decision about where every dollar we make ultimately goes—even the cost of a cup of coffee, or bus fare versus walking or an Uber or Lyft is what makes us richer or poorer. Suze Orman says she never pays for coffee because she can invest that $300 (two cups a day) a month into an interest earning account and have $250,000 saved in 40 years. 

A craftsman can use nothing more than a few hand tools and create masterpiece and heirloom quality furniture. An unskilled newbie can own every tool ever invented and screw up making a simple box. Did you know many of the Pulitzer Award winning photographs from WWII were taken with a simple Brownie camera? In fact, Virginia Schau, the first woman to win a Pulitzer for photography, was a housewife using a Brownie camera with only two frames of photos on year-old film on it. It’s not the tools, it’s what you can do with what you have.

That’s how most of the financial experts I reference in my book were able to go from broke to billions. It’s not the tools, their income, or the lucky breaks. It’s them — their mindset, their persistence, courage, and decisions that made them richer, or at times poorer. The same is true for you. There’s nothing special about these experts. They came up from humble (poor) beginnings and learned and failed and got back up and tried again. None of them knew all the answers when they started. They learned — just like you’re doing now — through trial and error. That’s why I start my clients off with that one question whenever they’re getting ready to spend anything. It can be very annoying to ask yourself, “Will I be richer or poorer if I buy this coffee?” 

When you get into the habit of consciously asking yourself that question, it eventually becomes a part of your routine, and then part of your financial discipline. You start seeing every purchase, no matter how small, in terms of your goals. Then, when you’re considering the big purchases, you really see the power of asking.

Obviously making any financial commitment is simple if you have a goal and a strategy. Buying a Porsche because you want it doesn’t seem very smart. But it can be a smart investment if you also happen to sell products and services to Porsche owners. While you don’t have to have a Porsche to sell to Porsche owners owning one would give you an unusual showroom with which to display your wares. You don’t need it (think Brownie camera), but having a strategy for buying a Porsche makes more sense than just buying a Porsche because “It’s cool and I want one.”

Weighing your reasons, and potential outcomes when asking whether you’ll be richer or poorer, or closer to purchasing something you want — your goal, is critical. Don’t just talk yourself into buying it with clever arguments. Be realistic. When you ask yourself this question it can help direct your actions and thoughts in other ways. 

WHERE ARE YOU NOW?

Have you just graduated from school, started your first business or job, just gotten married, bought your first home, had your first child, or started planning for retirement? Have you recently retired, or just lost a parent or a loved one? No matter what your age or situation, life is happening to you right now. It always will. We are all continuously bombarded with life events that can either derail our dreams and aspirations or force us to reassess our financial situation. You’re not alone. Everyone, at some time, goes through this process.

There are several pieces of good news in all this. The first is, “Opportunity never sleeps.” The second is, “There is always opportunity in chaos.” Bad times are not necessarily total losses. How you react and manage those timely or untimely events will significantly impact your future. By that, I mean if you learn to look for the silver lining in the storm clouds, you’ll find opportunities and lessons where others can’t. 

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” ~ Winston S. Churchill

You’ve learned the most important basic about money management — being aware of what your goals are, and becoming conscious about your money and where you’re spending it, and if how you spend is helping or hurting you. At least I hope you’ve learned that. You may or may not be feeling overwhelmed. I hope you’re not feeling overwhelmed — we’re just getting started! 

I’ll share more about a foundational system I’ve developed called SPARC in my next post. The intention is that by sharing it, you will feel more informed and empowered about your money and the decisions regarding it that you make.

For free money tips: www.jaykemmerer.com or www.berkshireadvisors.net

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