The Only Thing That Guarantees Your Financial Independence
by Alexander Green, Chief Investment Strategist
Monday, August 2, 2010: Issue #1314
Reading Tom Shales in The Washington Post recently, it dawned on me why so many people who should achieve financial independence don’t – and probably never will.
I’m not talking about those who are uneducated, unskilled or just can’t pull their lives together because of drugs, alcohol or crushing personal circumstances. I’m talking about the millions of bright, talented people who have plenty going for them and should be financially secure but aren’t.
If you happen to be one of them, just listen to Tom Shales. He offers a case study in the mindset of personal failure…
The Blame Game
Shales recently reviewed a new primetime TV show by self-help guru Tony Robbins, bestselling author of Awaken the Giant Within and many other books.
I haven’t read Robbins’ books or seen his show and no doubt never will. But I do know his basic mantra: If you want to achieve something in this world, you’d better quit whining and pull yourself up by your bootstraps, especially during tough times like these.
Is this message old, corny, and utterly predictable? Of course. The truth generally is.
But Shales has a bigger beef. He’s irritated that Robbins is “filthy rich” from selling “you know, jillions of books.”
Moreover, he calls Robbins’ message of personal accountability “trash TV” and moans that, “At no point does Robbins suggest that it just might possibly be society that has failed… All the bankruptcies, foreclosures, ruthless credit card companies and crooked captains of commerce – they must just be coincidences.”
Someone pass me the world’s smallest violin…
In a Word: Responsibility
The flip side of Shales’ rant is that those of us who didn’t buy more house than we could afford… didn’t use our home equity as an ATM machine… didn’t get caught up in the mania to flip land and condos because “real estate always goes up”… didn’t max out our credit cards or accept credit we couldn’t manage… we were just lucky, right?
Personally, I find it hard to swallow codswallop like this and keep breakfast down, too.
Sure, there are plenty of good, hard-working people who lost their jobs and fell into tough times through no fault of their own. But the Declaration of Independence proclaims the right to pursue happiness, not a guarantee that “society” will provide it.
Like me, I bet you know plenty of people who lived well beyond their means during the boom times. Now they’re paying for their mistakes. It’s a chastening experience. But most will emerge from this downturn, wiser and hardier souls.
Snivelers like Shales, on the other hand, who blame economic misfortune on corporate corruption (a minuscule portion of all U.S. business activity), greedy lenders (who apparently hog-tied their customers and forced them to take out variable-rate mortgages at gunpoint), or society (“anybody but me,” in other words), are destined to fail and fail again.
Until you take responsibility for your own actions and decisions, you cannot succeed. It’s just one of the laws of life. So what does this mean to you as an investor?
Four Simple Steps to Financial Independence
In short here are four simple steps to achieving financial independence…
- It’s up to you to maximize your income and minimize your outgo.
- It’s up to you to live within your means, use credit wisely (or not at all) and save as much as you reasonably can.
- It’s up to you to outline your financial future and follow a workable plan to achieve long-term financial independence.
- It’s up to you to invest your money wisely, keep a sharp eye on taxes and expenses, or make certain that you delegate this responsibility wisely.
This is how ordinary people begin building wealth in order to achieve financial independence. Of course, it’s much simpler and easier to blame “society” or “the breaks” for your problems.
But carping and complaining isn’t terribly becoming and – as Tony Robbins surely knows – it doesn’t change things anyway.
Good investing,
Alexander Green
Related Investment U Articles:
- How to be a Better Golfer and Achieve Financial Independence
- A Major New Threat to Your Stock Portfolio
- How to Become Financially Independent in Seven Years Or Less
- Currency Manipulation Tops G20 Agenda, As China’s Trade Surplus Soars
- Seven Investing Rules From Winston Churchill’s Life
14 Responses to “The Only Thing That Guarantees Your Financial Independence”
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Alexander Green is the Chief Investment Strategist of Investment U. A Wall Street veteran, he has more than 20 years of experience as a research analyst, investment advisor, financial writer and portfolio manager.
“In a Word: Responsibility”
It’s capitalism and potentially failure for the small people… but bailouts every time a bank decides it doesn’t need to be responsible for it’s own actions and debts…
“corporate corruption (a minuscule portion of all U.S. business activity)”
You’re having a laugh! The US federal reserve is the most corrupt entity in the US. When people see corrupt leaders, they’re going to care less about their own debts. Whilst it’s definitely advisable to not use these as role models and take care of your own debts, it’s simply human nature to copy the role models of society whether they are deserving or not of their position as role models.
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True – people do have a duty of care to their own interests. But as others have pointed out in this newsletter and others associated with it, Wall Street banks have many crooked (and apparently legal) methods of taking people’s money, and you have to be an insider to know what they are – unless someone who is, or has been, an insider, tells you what they are.
This black or white view of banks and investment does not do a great deal to inform us. It merely clouds the real issue, that both major and minor investment firms are greedy and arrogant, and see their clients as sheep to be fleeced. And whether it goes well or goes badly, they get to make money.
I believe in free market capitalism, but it does seem that it has become Communism for the rich, the free market for the poor. From each according to his ability, to Some (NB – not to each) to provide for their unrealistic needs. I even know hedge fund managers who think the whole system is sick. You can’t pull yourself up by your bootstraps if you don’t have boots.
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Alex:
Your best essay to date. For those of us who choose to “live beneath our means” in the hope, (not guarantee) of obtaining some level of financial security in the future, I say thank you and Amen. Responsibility may not be the “easy way”, but it is the only way to live ones life.
With Best Regards,
Bob Reese.
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Yes,yes, yes. I could not agree more with the comments of Alex. Unfortunately we are well on our way toward becoming an entitlement society instead of an opportunity society. I see it every day. The saddest part from my eyes is that the straight jacket of an entitlement mentality prevents that person from growing.
We all make plenty of mistakes in life but a sense of personal responsibility forces everyone to learn from those mistakes.
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you, can’t spend more than 80% of your income…the other 20%…you must invest it wisely….How ?…If you figure out how not to spend more than 80% of your in coming salary…in that figuring you will discover the discipline and attentiveness required to discern what would be a good industry ,a good sector, in which to invest,….then pray you are right!..
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Excellent, right on.
Too bad most people today went to school too long and didn’t learn anything except how too blame others for their own lack of responsibility.
Keep up the good work.
Jim
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Very good article. We need more direct discussion on the difference between rights and responsibilities in our modern world. Most people are all too familiar with their rights but have little or no understanding of the fact that those rights can only be attained by taking full responsibility for your life and what you do with it. In a sense the last several years will turn out to be a good thing for a lot of people because they are learning valuable lessons about the dangers of leverage and over consumption; assuming they have enough productive life ahead of them to recover.
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Well said Alex!
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It is not an article, it is a video which my computer does not play (temporary situation). Can you e-mail a transcript?
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Sadly i missed the commentary…..
Hopefully you will re broadcast as we are living in very troubling times..
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You should also add, that it’s also up to you to vote for politicians who don’t try to pawn off others people’s responsibilities on you!
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Alexander,
I have the highest respect to you and your articles. You are one of not too many people who gives smart advices and share opinion. Most of others just are making speeches to force you to buy something…
At the same time, I disagree with you about Tony Robbins. Yes, the guy is very rich. But kudos to him – whatever he does he is a guru in it. His inspirational DVDs made great positive changes in many people’s lives. It’s not BS, it’s truth. I am in my 50-ties, and I don’t consider myself a fool – I taught many people myself and quite successfully. But Tony taught me a lot of things about myself, gave great outlines on what to do in many tough situations in life. Yes, not all of his speeches are perfect but who IS perfect?
On another hand, I personally hate when any newsletter starts the promotion of the new service with “another great secret” that will make you rich. Common, don’t look for fools. Your readers are smart people as you see above.
Thanks for your articles!
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Thank you for telling the truth. It takes courage to tell people that they need to be responsible for themselves, especially in this political and economic environment. I am angry that I worked hard, paid all my debts and made responsible choices and am now being required to pay everyone else’s debt (via my tax dollars) as well. The banks are not the problem. Poor choices made by individuals created the mess we are in. Don’t blame the banks. I could have mortgaged my home to the hilt, charged my credit cards to the max and been in the same position as all the whiners. I didn’t. I never refinanced, never took out a second mortgage and took one vacation in 37 years. That is the difference. Just because the bank will give you the money doesn’t mean you should take it. Personal responsibility is what built this country and until our government changes course and requires individuals to be fiscally responsible, this country will continue to decline. We will end up like Europe. Is that the plan?
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Good article Alexander,
I agree with every word.
In fact, after working and saving for 25 years, losing two thirds of my net worth in 2008 as a direct result of widespread greed and fraud we call the “financial crisis”, and re-vamping my investment process to nearly recover what I had lost by mid-2010, I have decided to take a new direction in life.
I’ve built a conservative income portfolio that pays my bills and intentionally reduced my salary to virtually volunteer for a friend’s start-up company, ensuring that I no longer earn enough to contribute meaningfully to repayment of the irresponsible levels of debt our government has drawn to clean up the housing market.
I don’t have a problem with raising income taxes on very high earners ($1M+), but I no longer wish to contribute to a system that rewards productive workers by paying them $50K to $200K per year and then penalizes those same workers by taxing them at higher rates than those earning millions. Why a baseball player or a rock star should pay a lower tax rate than an engineer for any reason utterly escapes me.
So I’m out. I did my part and paid middle-class tax rates for 25 years. I am now going to spend my time as I choose and join the half of all Americans who pay no taxes. I will live humbly for a few decades and let the fat cats figure out how to clean up this mess.
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