The Road to Riches Part I: Debt-free Living, and Beyond
What are the odds of achieving the goal of debt-free living as a New Year’s resolution? Statistics indicate less than 10%, or close to zero if you not ready to change the way you think about money, and your lifestyle.
University of Scranton research suggests that just 8% of Americans accomplish their New Year’s goals, and financial freedom is at the top of the list. What goes wrong with the other 92%, we wonder?
Usually, people set their goals when enthusiasm is at its peak around the New Year, but the fervor fades away once lives fall back into dull routines afterward. Let’s dig deeper now, Huffington states, “life is shaped from the inside out.” Immigrating from China to America three decades ago with borrowed money for a one-way ticket, I started out as a graduate student. Since then, I have undergone numerous makeovers in every part of my life.
The truth is that there are no shortcuts for the road to riches. But it’s all attainable, and it could be fun.
‘A good start is half the battle’
Therefore, young people should start out on a manageable scale, instead of completing their targeted lifestyle in one step when they form a family. The latter often requires taking sizable loans for new cars, a stately house, and fancy appliances, which get most people deeply in debt at the very start. For those who are no longer young and currently immersed in debt, take one step back to examine your lifestyle and attempt to downsize your standard of living until it is within your means. After all, we all need fewer material possessions than we think to live a normal, and often happier life, even when it means shopping at Goodwill for that five-buck coffee maker. Just do not take out loans (mortgage is the only exception when ready).
A few months after I landed on this side of the Pacific, I bought my first car with $300 (and for someone who never touched a car before, I had struck gold) and rented a one-bedroom apartment as a graduate student in Cincinnati, OH. That was all we could afford back then. I passed this $300 car to a friend and bought my second car at $1000 and sold it for $1400 a few years later) during the first six—and truly joyful—years living in America, My wife (also a graduate student at U.C) and I lived off a meager $1,200 monthly stipend provided by the University of Cincinnati.
One may think I have had the knack for getting second-hand automobiles. I would say a knack for getting value for money when it comes to making major purchases. We all have it if we set our mind on it. Besides, everyone is familiar with the thrill of buying exactly what we need–and getting a great deal for it.
Curiosity, an admirable intellectual virtue, can go a long way in helping us gain fresh perspective from almost anyone anywhere. How about people from other cultures? Many are sitting in the next cubicle at work or living on the same street. For various reasons, Japanese, Chinese, and Korean immigrants are among those who have thrived in America through good or bad economic times. One hint? They use credit cards the most to pay for everything they need. Yet, they always make monthly full payments on time.
The reason they can do it is not that they all have deep pockets, but the way they treat their money. For them, their income, whether it’s earned by the sweaty hour, one-time bonus, or a gift, is regarded as fungible. It means money is money, and it’s all worth the same. Therefore, all these different sources of income belong to the same savings account–hence to be spent with equal rationality. Because of this fungible way of thinking about money and rationality of spending it, their savings accounts always have more than enough to cover their monthly expenses regardless of their income levels. This one trait renders them a sure path to debt-free living, which also leads to better credit scores, lower mortgage rates, and even a more desirable job offer or becoming successful entrepreneurs.
But my American friend at work seems to think otherwise as he often splurges all his end of year bonus on one big family vacation, treating it as ‘easy money.’ We often hear people grumble about how hard it is to come up with any extra money for investment. How about starting to treat different sources of money equally first? For example, putting away any extra income and annual raises into a CD if you are not comfortable with investment yet, so that you won’t be tempted to tap into it. This way, your standard of living won’t suffer, and the odds of achieving financial freedom will be almost guaranteed over time.
Now, let’s ask one question: Why can’t I do that?
Keep an open mind
When it comes to self-improvement, open-mindedness is a personality trait that can come in handy. In fact, there should be no limit to what we could accomplish by constantly venturing into new territories.
Communication skills are a must-have for career advancement in any field for anyone. And it is by far the biggest challenge for someone like me, who was born and raised in China and came to the U.S. in my late 20s. To make up for the time lost in a non-English speaking environment and, most importantly, to conquer the fear of speaking in front of people, I joined a local comedy club to learn and perform stand-up and improv shows. It was without a doubt way outside of my comfort zone. Yet, somehow, when I was on the stage by myself, with a sea of eyes locked in on me, my fears amazingly were all gone, and my brain worked 10 times faster than usual. The whole experience surprised me more than anyone by what I could come up with on the spot. After going through these routines many times, I simply don’t feel nervous under almost any social or professional situations. We all abide by the notion “What Doesn’t Kill You Makes You Stronger”, but only when we put ourselves under a true test can we be able to comprehend its true connotation.
For those who have an itch to enhance your public appearance and communicating skills, Toastmaster is a great place to start. All it took for me was to be willing to make an occasional fool of myself, in exchange for being less of a fool in real life.
During our company-wide downsizing years back, I was the only one (and only Asian) out of our 8-person team to receive a new position in another remote group where none of the team members had even met me before. I was promoted twice soon after. If there is one thing to credit for my success, it is my willingness to keep my mind open for new ideas, which has transformed my career, my financial well-being, and my life over the years in more ways than I could have imagined.
Among all the things we do daily, our dietary habits alone can either make or break us. For that reason, if we eat sensibly, it will help us achieve multiple goals beyond money. American consumers are spending more on dining out than groceries for the first time ever, according to a Fox News report on April 15, 2015. That’s an alarmingly high figure for shrinking pocketbooks and growing waistlines.
Bringing lunch to work is a beneficial ritual, but preparing most meals at home is a far greater virtue. It means healthier food for the whole family, more quality time together, a better sense of responsibility for the kids, and ultimately, saving a lot of money over time. How often can we have this “kill several birds with one stone” scenario in life?
Taking up a sport as a hobby
Playing a sport can benefit us for life–physically, socially, mentally, and financially. As a universally acknowledged truth, regular exercise yields a healthier body and mind, slashes our trips to doctors’ offices or drugstores, and boosts energy and performance at work. I grew up playing ping-pong but got into tennis while living in America, partaking in a USTA League for many years now. It’s nothing like playing at the U.S. Open, but the exhilarating sweaty thrills are the same for me, nevertheless.
Furthermore, people all over the country have been fretting about how expensive healthcare has become, and it will only get worse as we live in a more aging society. For each of us, a healthy lifestyle is by far the very best way to be out of these doldrums, and possibly the only way.
Knowledge is power
We all read a lot every day, so how about taking a keener interest in basic finance and increasing our knowledge by reading more about it? Who else cares about our own hard-earned money if we don’t?
For me, reading WSJ among other periodicals has been a daily ritual for many years. In America today, many analytical articles are about finances or economics. Even many political topics are economics oriented, such as tax, interest rates, immigration, minimum wage, and healthcare just to name a few. Any one of these could have huge impacts on our own financial well-being. One could start it by exploring how much cash you already have on hand, and where to park extra money for safer returns and potential to grow. In addition, how interest rates, inflation, and new tax policies should affect your financial decisions directly. You will be surprised what you can do to better your financial fitness, and subsequently, your quality of life. Even if you hire a financial advisor to help, you will need to understand all the jargon and be able to make many critical decisions based on your own goals in life.
“You only have to do a few things right in your life so long as you don’t do too many things wrong,” Warren Buffet puts it plainly. The road is clear leading to where we want to be. So, let’s start packing.
(Stay tuned for The Road to Riches Part II: Investing, and Its Thought Process)