Shift Your $ Mindset To Improve Your $ Status

Greetings & Happy October!

As we move into the last quarter of this crazy year of 2020, I have a feeling that the imposed quarantine has given most people a lot of time to reevaluate their priorities, to find new ways to truly value time spent with loved ones, and to look ahead to the upcoming Presidential election, just to name a few. It’s been a wild ride, hasn’t it?

Still, it’s during times of challenge that we often find creative solutions to situations, or come to the realization that perhaps a course correction in our mindsets and values is necessary. There are many levels and types of mindsets around money and wealth, and today I’m going to share some concepts about a few of those, taken from the last portion of Chapter 2 of my book, Messages From the Money Masters. The beginning of a new month is a great time to dive into a “fresh start” approach to things, and that all begins with your mental outlook (which YOU choose, by the way). So let’s get going!

THE POSITIVE OR “MIDAS” MONEY MENTALITY

People who have an abundance mindset feel very positive about their money. They trust their ability to make and manage it. Some people call this a millionaire or Midas mindset. They look at those who have this mindset and say, “Everything they touch turns to gold.” While it might seem that these people are “lucky,” or “gifted,” the truth is they’ve simply developed a habit of thinking that results in this mindset. They:

• Forgive themselves for their financial failures and mistakes, learn from them, and move on. They don’t constantly remind themselves of their past or past failings.
• They don’t compare themselves with others. Keeping up with the Joneses used to be how people thought of this bad habit. Now it’s “keeping up with Facebook,” and the things and lifestyles people see on social media. Don’t do it. 
• They have good money habits. You’ll learn about these same habits throughout the book. Practice them and you too can develop good money habits.
• They practice gratitude. Laugh if you want, but keeping a gratitude journal has been shown to not only improve your mood, but your contentment with what you have. Many of those who practice daily expressions of gratitude see their income and their wealth increase. You have nothing to lose by doing the same.

Take a great tip that comes directly from one of the Money Masters of this book;

”When you are grateful, fear disappears and abundance appears.” ~ Tony Robbins

STEER CLEAR OF THE POVERTY MINDSETS OF OTHERS

“Never take financial advice from a poor man or a business owner who just filed for bankruptcy.” 

You’d think this would be obvious, but it’s not. If someone giving you financial advice is living paycheck-to-paycheck, chances are they don’t know what they’re talking about in terms of money management. Or, even if they do, they don’t have the skills or discipline to apply what they know to their own money. If they can’t manage and invest their own money, do you really want to trust them with your financial fortune, however large or small it might be?

I remember a limo driver in late 1999 giving me advice on internet stocks on one of my trips to the Philadelphia airport. The dot.com boom was in a full-blown irrational exuberance trend. You literally could throw a dart at any dot com stock in those days and make money. During that time, I remember a discussion with one of my friends, Rick, who I started with in the business back in 1984.We were both wondering if financial advisors would still be sought after in the years ahead since everyone was earning double digit returns with literally no effort, no education and no market downside seen in years.

Needless to say a year later was a devastating development for these stocks as the Nasdaq composite started a 3-year decline and many dot com darlings went bankrupt. The Nasdaq lost 39.29% in 2000, 21.05 % in 2001, and 31.53% in 2002.

Much more recently while visiting Washington D.C., my wife and I Ubered downtown along with some friends. After some small talk, the driver realized what I did for a living and started to tell me how he was investing in various crypto currencies. Really?

All I will say is that I've only met one individual that admitted to buying some Bitcoin for under $1,000.00. The rest I've known who bought between $10,000-$18,000 per coin obviously aren't talking so loud about their cryptocurrency experience and the major swings or losses they have incurred.

There’s a difference in listening to the financial advice of others if you’re in a financial club where everyone is learning about investing, and the point of offering advice is to learn from each other. It doesn’t make any sense to go to a financial advisor working out of the trunk of his car, or neighbors or family members who are asking to borrow money for rent while at the same time telling you how to invest or manage your money. 

Even if your friends are having some success with their investments, you can’t build your success around their example. Yes. Study and watch what they’re doing, but understand why it’s working so you can make informed, educated decisions for yourself and your financial goals.

Mental health experts tell me we’re the sum of the top five people we spend time with. If you’re spending time with people who are working hard and trying to become better at what they do, or just better people, chances are that’s your mindset too. If you’re spending most of your time with people who come home and hang out in front of the television before going to bed, well — you’re probably doing the same. That old saying, “Birds of a feather flock together,” is true. You don’t find many eagles hanging out with turkeys. Look around. What kind of social circle are you in?

ASSOCIATE WITH SUCCESS

“Most people fail in life because they major in minor things.” ~ Tony Robbins

Chances are you’re not going to go out and find a millionaire to rub elbows with after reading this book. But, stranger things have happened. One of the things you must do is look at with whom you’re spending the majority of your time (spouses count). We really are a reflection of the company we keep. If you want to be smarter, associate with smart people.

The type of people you surround yourself with speaks of your values and what you stand for, but it also determines your attitudes about success, money, and money management. If you’re associating with people who live paycheck-to-paycheck, guess what your money mentality is going to be? That’s right — paycheck-to-paycheck. Find people around you, at school, church, meetup groups, etc. who have the kind of money mentality you want to have. Once you tap into that network you’ll find more like-minded people who will inspire you to up your game as well.

HAVE A GOAL

“Once your values are clear your financial decisions become easy.”  ~  David Bach

If you’re reading this, you’re thinking about your money situation—whether it’s good or bad. You’re probably exploring ways to improve it, or at least stop the hemorrhaging of cash. Maybe you’re in a place where you can take time to think about your financial future, or maybe you’re desperate, looking for a quick fix. No matter where you are, you still need a goal before you can move forward, make decisions or take action.

If you’re young, still in high school, college, or postgraduate school, you may or may not be thinking of your future 50 years down the road. But this is actually the best time to be doing exactly that!

If you’re in your mid-30s, 40s, or even 50s, it’s definitely time to be thinking about your future. The problem is, so many of us are so busy working, paying bills and living paycheck-to-paycheck or are so consumed with the pressures of just living life that we don’t take time to sit down, focus, and PLAN. Therein lies the secret to financial planning, says Bach. He continues, “No one has time or discipline. You have to set plans up to be automatic. The entire secret to saving is automation. When people save automatically, for college or to buy a home or retire—or all of the above—they actually get it done.” 

Of course I’d advise people to hire a financial planner! I am one! But David Bach also recommends people hire an advisor.

“Once you have $100,000 or more, you should hire a financial advisor—especially once you are in your 50s. Hire a fiduciary, a registered investment advisor who can provide a written financial plan. You want a clear understanding of how much money you have, taxes, Social Security, where your income will come from and how long it will last,” he told Forbes writer Jennifer Barret in a 2018 interview. 

BORING IS BEST

When it comes to investing, forget all the hype, excitement, and frenzy you’ve seen in Hollywood movies. Real investing isn’t like that, and when it is, the downside is just as intense. When it comes to investing, Bach says “Boring is really good. Have a diversified portfolio with stocks and bonds. When it comes to your money, boring is really good.” I concur. 

DON’T JUST FOLLOW YOUR FRIEND OR FAMILY’S ADVICE

Your financial success can’t be built around your best friend’s or your neighbor’s, or your family’s financial success—even if they are doing well with their investments. It’s got to be done on a personalized level. You can’t just copy your neighbor’s portfolio. Well, you can, but it’s so much better for you if you have your own portfolio based on your unique goals, values, and investment risk tolerances.

One of the best parts of this book is that it touches on the variety of advice from the money masters. While all these experts have arrived at their success through a variety of paths and philosophies, there are many points and paths on which they all agree— like budgeting, saving, paying yourself first, and losing your poverty mindset. This book is about finding, relating, connecting, and sharing those common points so that you see where they agree. That’s what’s most important.

If one person recommends something to you and they have influence in the money space, that’s one thing. But when three people share the same advice, that means so much more than the sum of its parts. Sometimes the advice people give won’t be couched in the same terms, but the intent or practice is the same. Three such examples I like to share come from non-financial experts. This piece of advice is about risk and change:

A pastor named Thomas S. Monson wrote about risk, and change, and opportunity in a blog post I read recently—“There is no tomorrow to remember if we don’t do something today.” He then related a story Arthur Gordon wrote in a national magazine, and I quote:

“When I was around thirteen and my brother ten, Father had promised to take us to the circus. But at lunchtime there was a phone call; some urgent business required his attention downtown. We braced ourselves for disappointment. Then we heard him say [into the phone], ‘No, I won’t be down. It’ll have to wait.’

“When he came back to the table, Mother smiled. She said, “The circus keeps coming back, you know.’

“‘I know,’ said Father. ‘But childhood doesn’t.’”

The lesson there, I believe, is to consider all the opportunities before us, be they financial or personal, and to think of the impact they will have on our financial and personal futures. Some decisions will be financial, others will be more personal. It’s up to you to decide what to build and how to build it.

Warren Buffett encourages seriously considering what you can do today in order to have a return on tomorrow (future). Through the years, there are people who have not done enough of this thinking, or they wait too long to act even if they do consider it. You could be on one or the other side of this. You either wait too long or you’ll move too fast.    

Many of my clients wait too long, and then they’re always trying to play catch up. I always like to say that it’s never too late to start. For example, I knew the owner of a local printing company. He was 61 years old, married to a younger spouse, and was always afraid to invest any money in any financial instruments other than a savings or money market account.

One of the things he asked me was, “Jay, is it too late for me? Did I wait too long? I know I should have started doing some of these things 20 years ago.”

I told him like I’ll tell you, “It’s never too late to start.” No, you probably won’t make the same gains you would have if you started investing at age 21 or if your parents started investing for you at birth. However, if you are the type of person who has waited for a long time, that shouldn’t stop you from looking at where you are today, evaluating where you are, and then seeing what steps you can take to improve on your current situation.      

I heard a quote many years ago that goes, “People don’t plan to fail in life or their finances. They just fail to plan.” That’s what I believe Buffett was referring to. Investing takes time. It takes discipline, and it’s not a one-time decision. It’s not a, “I’m going to do my planning this year,” and then forget about it for five or ten years and never make a change, never make an adjustment. 

That’s where people make their biggest mistake. They fail to see their money and their relationship with it as a living breathing thing that must be tended to regularly — like any relationship. They need to continually improve on the groundwork that they’ve laid for their finances and they’ve got to be disciplined and passionate about it. Like anything in life, things don’t normally happen quickly. Most of the millionaires out there today will tell you that it took time, effort, discipline and nurturing their finances to get to where they are today. In this book, we’re going to focus on what it takes to achieve some of those levels of success.

DON’T BE AFRAID TO FAIL

One of the things I frequently hear from both friends and clients is, “But what if I’m wrong? What if I fail?”

I remind them that if investing were an exact science, everyone would be a Warren Buffet and we’d all be rich. The fact is, investing is not an exact science. It’s a contradictory one. John Kenneth Galbraith once said, “In economics, the majority is always wrong!” But then again, history has shown the majority is often right. When do you know which way to take the “path less traveled” versus the “broad and worn public thoroughfare”? 

Hopefully the tips in this book will help you decide—and I promise you, the answers for your financial plan won’t be the same answers your friend gets. But, you’ll both get the same information to help you make your investment decisions! One of the most fascinating articles I came across when doing research for this book was on Warren Buffet’s financial regrets. 

There were 15 very specific regrets (along with the lessons he learned) in the article. I found it amazing to realize he had made some pretty poor decisions. There’s a link to the article at the end of this book, but three of the most impressive lessons Buffet learned were:

One: Don’t make financial decisions based on anger, spite, or vindictiveness.

I can’t tell you how common this is, this desire to “show somebody” or “prove something” or extract revenge in a financial way, be it divorce, investing, or buying or selling property. In a 2010 interview with Becky Quick on CNBC, Warren Buffett said the dumbest stock he ever bought was Berkshire Hathaway, but the dumbest thing he ever did with the company was to be vindictive about “punishing” a company manager.

Buffett said he first invested in Berkshire Hathaway in 1962. At the time it was a failing textile company. He believed it would begin making a profit when more mills closed, so he loaded up on the stock. Later, he says, the firm tried to chisel him out of more money. Angry and spiteful Buffett bought control of the company. He then fired the manager and tried to keep the textile business running for another 20 years. Now Buffett estimates this petty, vindictive move cost him $200 billion.

Two: Get input from people you trust before making major investments. 

In his 2008 shareholders letter, Buffett wrote, “Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year.”

Buffett explains he spent just over $7 billion on 85 million shares of ConocoPhillips, but its market value at the time of the letter was only about $4.4 billion.

Mistakes like this only emphasize the importance of consulting people you trust before making a major investment. That difference of perspective can often bring up issues, problems, or facts you aren’t aware of. 

Remember, investing isn’t a mathematical certainty. It’s both science and art, but mostly art. There’s a lot at play in investing decisions. There are times and opportunities even in the worst of times that can be your golden ticket — if you know what to look for. If you don’t believe that, then look at one of the most stunning successes of the last century — Airstream trailers. Of more than 400 travel trailer builders operating in 1936, Airstream was the only one to survive the Great Depression years. 

They didn’t survive because they were the cheapest. They survived because their founder, Wally Byam was focused on quality and on his customers. Did he understand money and how people related to it? He did. Like many other investors and rich men, Byam started off poor. By the time he graduated from high school both his mother and stepfather had died, leaving him orphaned and with not much money. His poverty wouldn’t last. 

By the time the Great Depression was in full swing in 1931, Byam decided to start his camping trailer business. His first unit the Clipper, sold at $1200, and was considered an expensive travel trailer. However, market response to the product was so strong Byam's company could not build units fast enough to satisfy the deluge of orders. Even during a recession, a depression, and hard economic times, it’s possible to make and save money.

Opportunity never sleeps regardless of the economic cycle we may be in. Remember the conversation about wise investing I mentioned earlier with Jimmy? I told him the same thing I’m telling you now: “Like Wally Byam, sometimes you’ve got to take a contrarian look at things.” 

I went further, asking Jimmy, “For example, right now, what asset out there does no one want to own?” At the time we were talking about this, the answer was real estate.

If you look back at real estate in ’07 you’ll understand why people were panicking, worried and getting out of real estate. The United States was experiencing a real estate housing bubble that affected over half of the U.S. states. Housing prices began to peak in early 2006, then quickly fell off, declining in 2006 and 2007. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. 

It wasn’t just houses that were dropping. So were credit scores. The credit crisis resulting from the housing bubble burst is an important cause of the 2007–2009 recession in the United States. Banks were collapsing, people who had six-figure incomes were becoming homeless, it was a nightmare for millions. 

People who bought their home in those years were underwater. Their real estate was really low. If you had the insight and the money to say, “Now might be a great time to be investing in real estate because nobody wants it and it’s cheap,” you’d likely be pretty rich today depending on where and what you purchased. Always remember the favorite real estate saying, ”Location, Location, Location.”

The same thing happened with the stock market. For example, the Dow Industrial hit a low of 5600 in March 2009. In March 2019, approximately 10 years later, it hit 26,000. When would you have loved to have money in the market? It would have been late 2008 and Spring of 2009 when everyone was selling the market and nobody wanted to own it.

Do you see the common theme here? Having money when people are fearful is a good time to make smart investments. Warren Buffet was quoted during the Great Recession, “Be Fearful when everyone is greedy and Greedy when everyone is fearful.” The lesson is, “Don’t take all of your money and throw it into any one investment idea or strategy. Use a well-balanced asset allocation model in an effort to spread your risk over various asset classes. 

That combination should include Large, Medium & Small Cap Equities, Short, Long and Intermediate term Government & Corporate Bonds, International Sectors, Real Estate & Alternative Asset Classes or “AAC” for short. Another term synonymous with AAC would be a Hedge Fund Asset Class strategy and or Non-Correlating Investment Assets like gold and silver.

If you are really looking to have upside growth with Zero risk to principal you can always consider an Indexed annuity. However, compare carefully for those with zero fees, shorter holding periods and the highest credit ratings from A.M. Best or Moody’s.

Having said that, it is advisable to talk to your Fiduciary Advisor within your SPARC team, which we will cover in Chapter 9. [Get your copy of Messages From the Money Masters today to get a jump on this]

While making the right investments it is important to know you can’t do that without three things:

• Money. You have to pay to play and having money is the first step in ensuring you’re ready to act when opportunity arises
• Education. Becoming educated creates confidence in your financial future and helps you make the right.
• Experts. You don’t have to have a personal posse of experts in all fields (real estate, etc.) around you at all times, but finding and hiring the right people to advise and assess your personal or business situation is critical. It ensures you don’t overstep your self-acquired knowledge when making complex decisions. Find and build a relationship with these experts before you need them, not when you’re in a crunch financially or time-wise.

Buffett makes it a practice to never invest in anything he doesn’t understand. “You have to learn how to value businesses and know the ones that are within your circle of competence and the ones that are outside,” Buffett says.

That’s because it’s crucial for investors to be able to confidently assess the businesses they hold. “Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence.

“The size of that circle is not very important; knowing its boundaries, however, is vital,” he said in his 1996 annual shareholder’s letter.

DISCIPLINE

Last, but certainly not least of the three reasons people struggle with money, is they may learn what they need to know, and they may even identify and struggle to change their mindset about money. But they discover they don’t really have the discipline to implement those changes into their lives. They try, and fail, and then try again, fail again, and give up. 

If you’ve ever seen a magazine with healthy models with six-pack abs, and gleaming, toned and tan bodies flexing their muscles and wished you had the same, you’re not alone. We all want those bodies, just like so many of us envy Warren Buffet’s 84-billion-dollar net worth. 

The thing is, body builders didn’t get those bodies after a day, or a week or even months at the gym. And it’s taken Buffett a lifetime to amass his earnings. Buffett started by buying one stock at the age of 11. Those bodybuilders started with one hour a day in the gym. Discipline must be built. It’s like body or wealth building. You don’t get it by wishing for it. You develop it.

• Maybe you can’t create a budget today. But you can save all your receipts and put them in an envelope for a month. 
• Maybe you can’t save $100 a month, but you can put $1 a day into a jar, or empty your change each day into a jar and then put that into a savings account.
• Maybe you can’t wrap your head around everything you’re learning about money, but you can ask yourself that one simple question before you buy anything from a fast food meal, to a new music or film CD, to a new outfit or shoes, or tool — “Will buying this _____ make me richer or poorer?” You can still buy it if you must, but by simply asking the question, you’re developing discipline.

Some of you are going to develop discipline fast. You’re used to and have some discipline already. Others? It’s going to take longer. That’s how it is. What matters is that you start. As a runner friend of mine who coaches people who want to run a 10K (about five miles), “No matter what kind of shape you’re in, or whether or not you can walk 100 yards, you’re still ahead of the guy/gal still sitting on the couch wishing they were running.”

Everyone learns to develop discipline. Everyone. If you’ve ever watched a baby learn to walk you notice they fall down a lot. Like, all the time. Then suddenly they don’t. They walk more than they fall. Then suddenly they’re running. Yes, they fall, but one day they’re zipping from one end of the room to the other, and in a few years they’re on their school’s track team, or racing up and down a basketball court or football field. They didn’t start out on the track team. They started out learning to stand up, to take a step, then another. They developed the discipline to keep trying because they wanted to walk, run, and win more than they wanted to sit on a diapered butt and wait to be waited on. It’s your choice. Start small. Build that discipline.

• Find an app to remind you to save or track expenses.
• Make a list of financial goals and review them daily
• Be patient. Discipline takes time.
• Take a class — either Dave Ramsey’s Financial Peace University, or something your local community college or bank offers.
• Find someone who can encourage you and hold you accountable to yourself.
• Resist peer pressure — stop hanging around people and places that tempt you to spend or not be financially responsible.
• Make a financial plan and have consequences (like promising to donate $100 to a charity if you don’t follow the plan) for not following the plan.
• Create a budget or spending plan.
• Hire a financial coach for a month. It takes 30-40 days to create a new habit and the investment is well worth the cost.

That’s it for today’s excerpt. Next week I’ll move into some tips from Chapter 3, which deal with gaining control over your finances by learning to practice discipline. These may not sound like “fun” topics, but trust me: both are necessary in order to secure a better financial future for yourself and your family.

Remember, I also offer corporate customized workshop training, and yes, during the aftermath of COVID, these can be designed to be presented online. As this last quarter of 2020 forges onward, there’s no better time to plan and take action on what you’re your stakeholders and management team can do to gear up for a fresh start. We’ve all been doing our best to keep our heads above water during this COVID-19 situation and all the changes it brought with it. Now let’s shift our mindsets into a more positive mode and stay open to new solutions.

Thanks for joining me here today and reading along. Stay safe, healthy and happy, and be sure to get your copy of Messages From the Money Masters today! Available in both e-book and paperback.

To learn more about our corporate “Money Masters” customized workshops, visit:www.jaykemmerer.com