Thanksgiving was great. Breaking bread with family and spending more time than usual thinking about how fortunate we are to be living at this time and place. But now it’s time to get a little work done before the Holiday Spirit renders us totally ineffective.
We’re getting close to the end of the year, which is a good time for reflecting over the choices of the past year and setting goals for next year. Life is about much more than money but money is one important element of life and deserves some thoughtful attention.
Cash flow or wealth accumulation?
Apparently lot’s of folks don’t know the difference between cash flow and wealth. They think if they’re making big bucks then they’re wealthy. Ain’t necessarily so. No matter how much income you bring in, if your bills consume it all you’re not getting wealthy. You’re just a conduit between your employer and your credit cards and mortgage company.
Wealth is the accumulation of assets that produce income, such as stocks, bonds, mutual funds, real estate rental property, etc. People who have wealth don’t have to depend entirely on working to produce cash flow. On the other hand, people who have big incomes and spend it all are going to have to work until the day they die.
Middle-class Americans have a choice about whether we’re going to accumulate wealth or just generate cash flow.
Committing some of next years’ cash flow to creating wealth could be a good goal for the New Year.
Dave Ramsey or Donald Trump?
Most everyone knows who both these gentlemen are so no introductions are necessary. Their approach to managing family finances are at opposite extremes. One hates debt (Ramsey) and one loves debt (Trump). Which one of these guys has the best strategy for ordinary middle-class people?
Ramsey promotes paying off all debt and accumulating wealth by investing in traditional assets like stocks and bonds.
Trump promotes borrowing mega dollars and investing in real estate in anticipation of inflationary gains. There you have it. Two opposite approaches to the same situation.
I suggest that Trump’s strategy might work, and it might fail, but nobody ever went broke following Dave Ramsey’s advice. I doubt that most people possess the time, skill or temperament to select and invest in real estate and making a mistake could wipe you out, as it has done to Trump on several occasions. Thinking about being debt-free makes me smile and I suggest that Ramsey’s strategy is the best deal for most people.
It’s pretty simple to get debt-free. Hard, maybe, but simple. Just commit to spending today’s dollars tomorrow rather than spending tomorrow’s dollars today. Pay off those credit cards and car loans and wait until you have the cash before buying anything else. A little self-discipline goes a long way toward success.
Relaxation or hustle?
Historians tell us that primitive people spent around 25 hours a week providing the necessities of life for their families. They were always at risk for starvation, attacks by wild animals, etc., yet they didn’t live with the stress and hustle modern Americans have adopted as normal. With all the timesaving devices and high standard of living we have it puzzles me why everyone is always in such a hurry.
Are any of us in real danger of starvation or being eaten by bears? What is it we want so badly that we sacrifice our leisure time? Are we, as an old cowboy once said, in pursuit of younger women, faster horses and more whiskey? Or is it that Madison Avenue has convinced us that we have to live in a constant frenzy or we’re somehow un-American? I rather suspect the latter.
I’ve sometimes quoted the old cliché that we spend money we don’t have to buy things we don’t need to impress people we don’t like. A cliché, true enough, but I think it goes a long way toward explaining the fast pace we feel obligated to maintain.
Perhaps while considering a plan to convert cash flow into wealth next year this could be a good time to set some priorities on time management as well. What’s really important and what’s just fluff to please the neighbors? What good is all this success if we’re always right on the edge of hysteria from trying to juggle too many things and just one paycheck away from disaster because we’ve already spent next year’s income?
As for me, I’ll just sit around awhile, watch the truck rust while being thankful for all the money I saved by not buying all the stuff I didn’t need or don’t have a place to put.
Thought for the Moment
You must change in order to survive.
— entertainer Pearl Bailey (1918-1990)
Joe D. Jones, CPA (retired), is publisher of the Mississippi Business Journal. Contact him at firstname.lastname@example.org.