The point of the book seems to be that success is not just dependent on our own efforts. There are factors beyond our control that significantly affects whether we are successful. The idea that if one just works hard, applies oneself, one will eventually be successful is shown to be flawed. Gladwell shows that details like which month you were born in, your birth year, your ethnicity and other factors beyond our own doing, can make a decidedly difference to how well we do in life.

The month you were born can make a difference when it comes to activities that have a static cut off date, and which require one to be of a certain age by the cut off. For example, some sporting activities might require one to be a certain age by January 1, to qualify for a particular playing level or class in the sport. Let us say the particular age to be by the first of January is 6 years. Someone born in December might just make the age of qualification, while another born in January of the same year as the former, would not only qualify but would probably have an advantage over the one born in December, in that he would be almost a year older. This may mean he is more physically mature which can give an advantage in some sports. The implication is that those born toward the start of the year will have an advantage over the others in being successful in the particular sport.

In the example above, What happens then is that this initial advantage leads to greater advantages as the years go by. This will happen in certain sports because of how the progression happens. A child who starts out with the advantage of
being older and more mature is likely to do better, and therefore placed in the better team, which usually has the better coach(es). As the child gets to the next class level in the sport, he will now be in a better position to be selected for the best team than the other children who happened to be born months after him. So again, he gets the better coach(es) which widens the skill gap between him and the others who did not make the ‘A’ team. So although as one gets older, the difference in maturity between one born in the start of the year and one born towards the end, will become less significant, the better coaching due to the initial advantage would have led to a widening skill gap as the years go by. Gladwell used Hockey to illustrate this point. He shows tables of statistics which do tend to support this analysis. The best players tend to be born between January and March.

In the next entry to this series, I will highlight another factor outside our control that plays a part in whether we will be successful.

Related posts:

1. Laws of Lifetime Growth -Always make your future bigger than your past
2. Save And Become A Millionaire
3. The Richest Man in Babylon

Sometimes we have experiences that are embarrassing, or leave us with a very bad taste. You know those experiences where you would rather forget they happened, and wish everyone else would too. But while they might be painful in a certain kind of way to even think about, it is far more profitable to constructively analyse the particular experience, and extract lessons that can help you avoid making the same mistake, and/or effect a more satisfying outcome when

similar situations arise. When you consider what worked, you can build on that to improve your effectiveness. And when you consider what did not work, you can avoid repeating that.

I recently gave a presentation where for the most part I thought I did okay. But when it was over, I realised I forgot to mention a few important things I had in my notes. I also realised that I did not end in the way that I really wanted to. When I think about these mistakes, it is somewhat painful, and I wonder if my ineffective ending was very noticeable. But if I were to simply just try to blot it out of my mind, I would be missing out on an opportunity to be more effective. When I think about why I made these mistakes, I can try to put measures in place next time to help prevent them from recurring. When I focus on the parts that were particularly well received, I can consider what it was about them that made them so effective, and try to repeat this, and even do it better the next time, which will produce greater success in the future. And that reminds us of law #1, Always make your future bigger than your past.

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1. Laws of Lifetime Growth -Always make your future bigger than your past
2. The Richest Man in Babylon
3. Beware Raz-Captcha WordPress Plugin

Always Make Your Future Bigger Than Your Past

This essentially means that we need to make some improvement in something that is currently true. While we are alive and conscious, we have the choice of growing. It only requires improvement of some kind in what exists now. This could be learning something new, teaching something, contributing to the success of another, exercising more patience etc.

A good question to ask yourself is: “What needs to be done over the space of a year, for me to be content with the progress made over that time”?

When you answer that question, you can start setting some goals that will ensure you achieve contentment with your progress over the next year. Moreover, if you seek to make your future bigger than your past, then these goals will further your personal growth and enrich your life, leading to true wealth.

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1. Laws of Lifetime Growth -Always Make Your Learning Greater Than Your Experience
2. The Richest Man in Babylon
3. Organic Sloggi Future Bras

The little book is truly a very inspiring piece of work. It is essentially a compilation of stories, which are all somewhat related, set in the ancient city of Babylon, that all contain lessons of the principles that are foundational to wealth building. In each story, a character who has managed to acquire vast amounts of wealth is found in a position to impart these principles to the common man who would love to have the secrets to riches.

Here are some of the principles taught in the book. I post these not for the sake of trying to make reading the book redundant, as what I place here is no substitute for the book. But this is to help reinforce in my mind these important points while imparting some of the lessons to you.

Probably the most fundamental point stressed throughout the book, is to set aside at least one tenth of your income just for savings. This should not be touched for living expenses or luxury spending. Rather, this should be saved and eventually used to make investments. We must find a way to live only on 90% of our income. The 10% allocated for savings must not be compromised.

As stated above, the savings you accumulate should eventually be used to make investments. But be very cautious with the money and where it is being placed. Seek advice from those who have the specialised knowledge to guide you in your decisions. I could have saved a lot of money had I followed this.

While we’re on the path to achieving wealth it makes sense to hone our skills which we use to attain an income. Becoming better generally means more opportunity to increase our income, which would accelerate our progress, as we would be able to save more and therefore invest more.

We should be willing to work hard and do a good job. Again this will open up opportunities, as we become respected. It also contributes to our personal growth, making us better people, which will serve to empower us on the path to true wealth.

Do not procrastinate in doing what is good for you. Sometimes we get the chance to make very good investments, but because we delay in making a decision, the opportunity passes us by. Be cautious, yet be bold!

Finally (for now), debt must be seen as an enemy to be conquered. It must not rule us. So avoid debt, and when in it, taken firm measures to get out of it.

What I summed up above, is not the totality of lessons and principles taught in the book. But they are key to building lasting wealth.

Related posts:

1. Pay Yourself First!
2. Multiple Income Streams
3. Laws of Lifetime Growth -Always make your future bigger than your past

The term multiple income streams has been bandied about quite a lot, as the way to get out of the rat race. Sometimes one can hear people throwing around the phrase as if it gave the secret answer to becoming rich. The truth is, it is just a term to describe precisely what we’ve intuitively known, or could have known by applying some common sense.

As one would expect, the term multiple income streams refers to having more than one source of income. Now this can be good, and it can be bad. On the negative side, let us say you work 9 to 5 at a regular job. That would be one income stream. Now if you took another job from 7pm to 10 pm, then this would be another income stream. We could also extend this and throw in a weekend job in the mix, giving you 3 income streams. Think about that life for a moment. Does that sound attractive to you? Is that something you want? I bet not.

What we see then, is that going by the technical definition of the term, multiple income streams is not necessarily a good thing. However, when most people use it, they do not mean to portray such a hard life. Let us look at an alternative picture. We could still say you have your regular 9 to 5 job. But instead of a night job, suppose you had written and sold a song, for which you collect royalties. Those royalties would be considered another source of income, though probably a bit smaller than your salary from your day job. Suppose you also had investments that brought in dividends each year. Well that would be another income stream. You could count another still, if you happened to own an apartment which you rented out.

Now how does this picture compare with the first? No doubt this is the more appealing scenario. In this one, you have 3 sources of income as in the first, but in this case, you hardly do any additional work outside your regular job. Just imagine if you had enough such income streams that brought in more than your 9 to 5 job. Imagine if you could quit your job and live off the other income sources!

This kind of income that requires little effort to keep flowing, can be considered passive income. Most of the work would have been done one time, at the start. This is what you should be thinking of when you think multiple income streams. If you were able to implement something like this in your life, then losing your job won’t be so detrimental. Likewise, if any one of them were to dry up, you’d still have some income. Another benefit which is probably obvious, is that you’d have more money, which you could use to do more investing and hence accelerate your journey to financial freedom.

“Okay, so having multiple income streams sounds great! How do I get this?”, you ask. Well that is a good question. It is something you need to spend some time thinking about, and answering for yourself, as no one knows you like you do. Your answer to this should be tailored to your inclinations, and your situation. But fear not! We will help you to get the ideas flowing.

There are essentially 4 main avenues you can take to build your income streams. These are:

1. Real Estate
2. Equities/Forex Markets
3. The Internet
4. Brick and Mortar type Businesses

Some of the above might overlap a bit. But you get the idea. Depending on your desires and your strengths, you’ll probably be drawn to one of the above more than the others. What you need to do, is decide where you want to focus your energy. Once you have determined that, then you must begin to get educated in this area. Read as much as you can, jot down your ideas, ask questions, build your plan, then of course, implement it!

Check out the other areas of this site to get ideas of what you can do, and also to learn how to go about doing certain tasks in your field(s) of interest.

Related posts:

1. So You Want To Be A Millionaire? – Introduction
2. Build A Reserve Fund
3. Automate The Millionaire Plan

Now that your mind is set on the millionaire path and you have a plan in place, allocate some portion of your funds for a charitable cause. Demonstrate confidence in your fortune to come, by giving to the less fortunate even before you have acquired your millions. You can be instrumental in helping others to get on the path to success. What goes around comes around. There are many reasons to be charitable, some of which will eventually be explored on this site. Your contributions are even tax deductible in many cases. But don’t analyse this too much. Just be thankful for what you have, and show your appreciation by returning a token of your blessings to help lift your fellow human beings to a higher quality of life.

Action Plan

+ Determine a worthy charity to contribute to.
+ Automate your payments
+ Keep necessary documentation to take advantage of the tax breaks.

Related posts:

1. Automate The Millionaire Plan
2. Eliminate Credit Card And Other Bad Debt
3. So You Want To Be A Millionaire? – Introduction

There are some debts that are terrible, and some that actually result in profit. In the case of the latter, you might borrow money to start a business which in turn could generate a lot more than the loan including interest fees. In this case, debt allowed you to reach a higher net worth. But there are also the cases where paying back a loan results in an overall payment that is much more than the value of what you got the loan for in the first place. An example of this is credit card debt. This is one of the worst kinds of debt to have. The interest rates are ridiculously high. If you pay just the minimum, you will ultimately pay a lot more than the value of your purchase, and it could even take many years to completely pay for it.

If you suffer from this kind of debt, then you need to start attacking this problem now. You must start paying more than the minimum. So assess how bad the damage is. See how much you owe, and find out the interest rate(s). Do some calculations. Sit down with a bank representative if necessary, and find out how much you need to start paying in order to get out of the hole, in the fastest timeframe that you can manage. Use a portion of the amount you decided to pay yourself with first (ie. of the amount you decided to put towards pension or 401k) to pay off your credit cards. Eliminating credit card debt must be your priority. Consider this an obstacle in your path to millionaire status. It is something you must overcome, but it can be done.

Once you’ve arrived at a plan for eradicating credit card debt, automate it. Get your bank to automatically deduct this payment each month. This is one payment you don’t want to be late on.

Action Plan

+ Determine your debts that are not expected to result in profit
+ Rank them in order of interest rate (higher the interest rate=more costly)
+ Tackle the most costly one first
+ Stop incurring credit card debt (don’t carry it around, don’t use it)
+ Renegotiate interest rates if possible
+ Use a portion of your Pay Yourself First funds to pay off debt (50% recommended)

Related posts:

1. Buy A Home?
2. Automate The Millionaire Plan
3. Pay Yourself First!

The heading is phrased as a question rather than an advice statement, because there is a debate about whether this is really a good idea. It is pretty much agreed that owning a home is a good thing, but the question is, at what point is it best to do this. David Bach in his bestselling book, The Automatic Millionaire, highly recommends buying a home as early as possible. His perspective is that this is one of the best investments you can make. On the other hand Robert Kyosaki, in his Rich Dad book series, portrays a home as a liability rather than an asset. Mind you, Kyosaki is not saying that one should not bother with a home. He simply believes that one probably would be better off using the money to purchase a home, to put in “investments” that actually provide a cash flow, or contribute to lowering expenses.

So rather than advising one view over the other, some of the points in favour and against each side will be highlighted, and the reader can then make his own judgment of how best to proceed here.

In favour of purchasing your home are:

1. If you are renting now, then acquiring your home will allow you to have something (ie. the house) at the end of the day to show for your monthly payments. Also, the monthly payments will eventually stop (when you pay off the mortgage), whereas if renting, this expense will always be there.

2. Buying a home allows leveraging power. If you paid $10,000 down payment on your home that costs $50,000 and borrowed the rest, you would be using $40,000 of someone else’s money. That is you put one-fifth the value, which means you have a five to one leverage. Now let us say that the value of the house appreciated to $80,000 in a few years. You could then turn around and sell it, making a theoretical $30,000 profit after paying back the loan. So in effect, you would have been getting $30,000 for your $10,000 investment (actual profit would be smaller as there are various fees and expenses to take into consideration). That is 3 times your investment.

3. Depending on the country you live in, there could be tax breaks for becoming a homeowner.

4. Real Estate tends to appreciate in value.

Arguments for viewing your home as a liability:

1. It is common for people to never really own their home, as people tend to buy a new home every so many years, each time starting over a 30 years loan to pay off the previous one.

2. Although there are tax breaks on mortgage payments, all other expenses involved are from your money that has already been taxed.

3. There are property taxes to pay, which can increase.

4. It is possible for houses to not appreciate.

5. Your money gets tied up in the purchase of the house and the expenses that come with it. This money could instead be used to build an investment portfolio that would increase cash flow. So one effectively loses time for which these investments could have grown, capital which could have been used to compound the investments, and education which comes from the experience of investing.

Now in the event you decide to purchase your home, here is a useful tip for repaying the mortgage.

Negotiate your mortgage payments such that it is accepted twice a month. If you pay twice a month, rather than once, you will end up saving some years of payments. For example, if your monthly payment is $2000, then your strategy should be to pay $1000 every two weeks. The reason that this will save you a substantial amount, is that you in effect cut down earlier on the loan amount that is gathering interest. In reality your loan is gathering interest each day. Paying some of it early lowers the amount that the interest can accumulate by. Check out this calculator Mortgage Calculator Put in some figures, and you’ll see the comparison made between paying once a month, as opposed to twice. The higher your interest rate, the greater the variance in the two approaches.

Here is an example of the details for a 30 year mortgage on $80,000, at 8% per annum. Comparison is made if the payment is done monthly versus biweekly (every two weeks).

Mortgage Comparison
Monthly Payment: $ 587.01
Total Int.: $ 131324.2
Avg Int each Month: $ 364.79
……………………………
Biweekly Payment: $ 293.51
Total Int: $ 93192.54
Avg Int each BiWeekly Period: $ 119.17

Principal Remaining
Year# Standard Biweekly
1 $ 79331.71 $ 78697.72
2 $ 78607.95 $ 77287.53
3 $ 77824.12 $ 75760.49
4 $ 76975.23 $ 74106.93
5 $ 76055.89 $ 72316.36
6 $ 75060.23 $ 70377.42
7 $ 73981.95 $ 68277.83
8 $ 72814.16 $ 66004.26
9 $ 71549.45 $ 63542.32
10 $ 70179.76 $ 60876.37
11 $ 68696.4 $ 57989.54
12 $ 67089.91 $ 54863.5
13 $ 65350.09 $ 51478.45
14 $ 63465.86 $ 47812.92
15 $ 61425.25 $ 43843.66
16 $ 59215.26 $ 39545.52
17 $ 56821.85 $ 34891.24
18 $ 54229.78 $ 29851.32
19 $ 51422.57 $ 24393.8
20 $ 48382.37 $ 18484.07
21 $ 45089.83 $ 12084.68
22 $ 41524.01 $ 5155.04
23 $ 37662.23 $ 0
24 $ 33479.93 $ 0
25 $ 28950.5 $ 0
26 $ 24045.12 $ 0
27 $ 18732.6 $ 0
28 $ 12979.15 $ 0
29 $ 6748.16 $ 0
30 $ 0 $ 0

Paying biweekly in this case results in 7 years less of mortgage payments!

Note: Ensure that your financial institution is crediting your loan as you make your payments. If they take your money but don’t credit it until the end of the month, then there will be no advantage.

Action Plan

+ Determine whether buying a home is in your best interest at this stage of your life
+ If you decide you want to purchase a home, determine how much you want to pay from your own pocket,
+ Start saving toward this
+ Make it automatic
+ Get a mortgage that allows biweekly payments.
+ If you decide you side with Robert Kyosaki, then maybe you will want to purchase his books Rich Dad Poor Dad and Guide to Investing

Related posts:

1. Eliminate Credit Card And Other Bad Debt
2. Save And Become A Millionaire
3. Pay Yourself First!

Now that you are saving, you need to have some targets. Maybe you want to buy a car, and/or a house. You need to plan for these things. How much do you want to pay upfront, and how much are you willing to borrow? Once you know the answers to these questions, you’ll know how far away you are from your goals. You’ll also be able to determine how much you can save entirely toward your retirement fund (not including your pension plan). But one of your primary goals when just starting out is to establish a reserve fund.

The reserve fund will serve you in times of emergencies, or in situations such as becoming unemployed. If you lose your source of income, you will want to have something you can draw from until you are able to find a new income stream. Give yourself a buffer. It will reduce your anxiety, and give you time to find something else. It also gives you flexibility if you ever desire to leave your job.

So how much should you strive to have in reserves? You need to make an assessment relevant to you. Based on your profession, how easy is it to find something else in that field? Are you personally one of the more highly marketable ones in your industry? (You should be working to improve your skills and competency while you are employed. This will reduce the time needed to replace your job if it comes to that). Generally speaking, it is advised to have at least 3 months salary in reserves. But depending on your situation, you might need to have more.

Your reserve fund should be put away, and left untouched until it becomes necessary to use it. It is not for treating yourself to whatever luxury you fancy. Use it for what it is meant for. So hopefully you’ll never have to use it, and in that case, it will be a bonus to your retirement fund. Once you have this fund in place, you can comfortably plan for a car and a house. But don’t forget to factor in the additional expenses incurred from these purchases, into your reserve fund.

Action Plan

+ Determine the ideal target amount for your reserve fund
+ Create an account dedicated to this purpose
+ Automate your reserve fund payments to this account
+ Hone your skills to maintain your competitiveness in your profession

Related posts:

1. Automate The Millionaire Plan
2. So You Want To Be A Millionaire? – Introduction
3. Pay Yourself First!

One of the regular problems with a good plan, is getting it implemented. It is good to put away a portion of your income to a retirement fund. It is good to save. But human nature being as it is, causes the plan to abort, if not before it even gets started, then probably in the very early stages. Most people just don’t have the discipline required to carry out something positive on a regular basis, for extended periods.

The good news is, that in this age we live in, many things can be automated. Automation means that you only need to set things in motion, so that your lack of discipline doesn’t interfere with your sound financial plan. So if you could automate the setting aside of some percentage of your income to go directly into your pension fund, then do it! Once done, you don’t have to manually do it again. Also, you won’t have it in hand to be tempted. If you’re also saving another portion of your salary in some kind of savings account, or mutual fund, then find out how you can automate this process. The chances are that your bank will be able to accomodate this. You just need to ask. Then do it!

Action Plan

+ Check with your financial institution your options for automatically making payments from your account
+ Apply this to your pension and the amount you decided to save

Related posts:

1. Build A Reserve Fund
2. Pay Yourself First!
3. So You Want To Be A Millionaire? – Introduction