Yearly Archives: 2014

I bought a used car with cash, this is why

2007 Chevrolet Malibu. $6000
2007 Chevrolet Malibu. $6000

It has been about four years since I last had a vehicle. I have been very happy using my bicycle, borrowing vehicles from my car sharing community and using public transportation, and yes, walking from time to time. But new circumstances created a need for a vehicle.

In some of my previous posts I contended that one way to save money is to buy a used vehicle and to pay cash for it.

Paycheck to Paycheck

I have read many reports which claim that many North Americans live from paycheck to paycheck. Yet, when I walk down the streets, I can not help but to notice all the shining vehicles rolling along the streets. I will never understand why, if someone is living from paycheck to paycheck, they would get a brand new vehicle.

Recently, I spoke to a salesperson who insisted in having a luxurious vehicle because she had to give an appearance of wealth to her clients. Really? to me this  is sign of waste. I believe that the one way a salesperson can differentiate herself is by providing excellent service, not by wasting money in a luxury vehicle.

According to another study which I read some time ago, most North Americans have most of their wealth tied up in their house and their vehicle. A house can appreciate at a rate of 2% per year and a vehicle depreciate in about 5 years. Both of those choices are less than optimal refuge for your wealth.

Reasons to buy used

  • I bought a 2007 Chevrolet Malibu for $6,000. A 2015 Malibu costs about $27,000. I saved $21,000.
  • My car will be parked most of the time. If my car is not been used, it doesn’t make a difference whether it is new or used.
  • The speed limit in Montreal is 100 km/hour. I could have the most powerful vehicle and still I would not be able to drive past the speed limit, so why would I waste my money paying for speed and performance?
  • Many luxury cars come with MP3 players, GPS systems, and many other gadgets. I carry all those gadgets on my Android phone. I don’t need to pay extra for the latest state of the art technology.
  • I saved money on sales taxes.
  • Since the vehicle is less expensive, I save money on car insurance.
  • I save lots of money on  opportunity cost. The price of the vehicle brand new is $27,000 and I paid $6,000. This means that I saved $21,000. $21,000 invested at 8% for one year is $1680. Think about this for a second. If I buy a new Malibu, on the first year I lose about $2,000 in depreciation. By buying a used Malibu and investing the difference, the first year I gain about $1680.
  • When I sit in traffic, I am stuck in the middle of a highway and it is equally annoying whether the car is new or used.

Reasons to pay cash.

  • If I buy a vehicle on credit, I will have to pay interest.
  • If I buy the car on credit, I don’t really own the car until it is completely paid off. If I were to fall into financial difficulties and miss a couple of payments, the car can be taken away from me.
  • By paying cash, I have peace of mind. I don’t have to worry about monthly payments, about credit ratings, I just wrote one check and I don’t have to think about it ever again.

As our society continues to evolve, technology continues to improve and cities become overcrowded, we search for other transportation alternatives. Technology has become so advance that a vehicles can easily be driven for 200,000 kilometers before they start to break down. Car Sharing communities such as Communauto in Montreal and Zipcars in the United States are making vehicle ownership obsolete. Public transportation and services such as Uber are allowing us to get the best public transportation one can imagine. And the future where we will be able to summon a Google driverless car with our smart phones is just around the corner.

When you go shopping for a vehicle, do you buy used or do you buy new? Do you pay cash or do you finance?

My Services:

I am happy to be your life coach, money coach, or public speaking coach. I am new in this business, so my fees are low, $20/hour. If you need a friend to talk to, someone who knows about life, money or public speaking, let’s book a session. Send me a message and we will take it from there.

Selling your property? Be aware of mortgage prepayment fees.

Last party at my condo
Last party at my condo

How TD Bank screwed me out of $5,000

I just did it. I sold my condominium for $235,000. There was only one problem. I never bother to read the fine print and found out that I had a mortgage prepayment penalty. Yes, there was a big penalty of almost $5,000. This got me upset and resentful with my bank but it was my fault. I did not take the time to read the contract and to negotiate better conditions for me.

This is how it happened.

When I first got my mortgage, about three years ago, I got a one year mortgage and my plan was to renew it every year. Then, about one year later, while doing some unrelated banking transaction the banker told me: “Hey if you renew your mortgage for five years, we will give you this amazing lower rate.” He gave me a stack of papers to sign and of course, I didn’t see that there was a penalty for early payment of the mortgage.

What will I do with all that cash?

$235, 000 sounds like a lot of money, but after paying back the mortgage and the many other debts that I have, I am left with very little. With anything left over, I will buy a car to become an Uber driver (more on these on future blogs) and put some money into the stock market.

How to avoid prepayment charges.

  1. Read the contract. Usually, when you are looking for a mortgage, many banks are competing against each other to lend you the money. Remember, traditionally banks make money when they lend money. Look for the part which says “Prepayment disclosure” or something similar. You might see a small check-box which you will be asked to initial to show that you read the paragraph.
  2. Negotiate: Once you find the offending paragraph, ask them to take it out. If the representative don’t have the authority to do it, ask to talk to the manager. If the manager refuses, tell them that you will take your business elsewhere and shop for other lending institution who will be more hungry for your business. Remember, the bank staff get commission or bonus points after you sign that contract, so they will be eager to do business with you.

Other things to consider

  • Consider one year mortgage. Usually, when you get a one year mortgage, you are getting the lowest possible mortgage in the market. My gamble is that if the central bank increases interest rates for the following year, they will do it gradually, so even if the raise interest rates by 0.25%, you will still be in a great position. This was my original plan, but the banker tricked me into getting a 5 years mortgage instead. Now I know better, and you do too.
  • Weekly payments. One way to reduce the number of years you pay your mortgage is by making weekly payments as opposed to monthly payments. Two great benefits will surface from this adjustment: a. you will pay less interest throughout the life of your mortgage and b. you will pay back your mortgage sooner.
  • Increase monthly payments. Imagine that you are a tenant in a house or an apartment. Your landlord will probably increase rent every year. Why not do the same with your mortgage payments? Let’s say that you increase your payments by one percent per year. If your salary increases at the rate of inflation (about 2%), then to increase your mortgage payments by 1% should not be a big sacrifice.
  • Advance payments. Many people obtain bonuses from work. Why not give a bonus to your mortgage? Imagine that at the end of the year, you get a $1,000 bonus. You could use $500 to prepay your mortgage. Over, a 20 year mortgage, your $500 could go a long way.

Owning a property is a big responsibility, full of expenses and pitfalls. I would love to hear about some of your mistakes.

My Services:

I am happy to be your life coach, money coach, or public speaking coach. I am new in this business, so my fees are low, $20/hour. If you need a friend to talk to, someone who knows about life, money or public speaking, let’s book a session. Send me a message and we will take it from there.

Live a richer life, consume less.

Alain holding a baby boa
Live a richer life, consume less.

Let’s consider our priorities.

I have been watching the crazy Black Friday in the United States, Canada, and England. There is a consumer frenzy to buy more, more, more. We are so easily manipulated by the media and our ability to reason goes out the window.

We are in such a vicious cycle. We work more to buy more, and to constantly upgrade our possessions. For example, my mother buys a new car every four years. I have another friend who upgrades her luxurious vehicle every four years. And the examples are endless.

When examining our financial situation, we have to put life into perspective. What do we really want? Do we really want the big house, the two cars, the boat, and the chalet? or do we want to be happy?

In Canada, I am very close to the poverty line, I earn about $24000 per year. Yet, I consider myself rich. I live in a nice apartment in one of the nicest neighborhood of the city. I have internet connection, a cell phone, a laptop computer and I pay all my utilities on time. I work part time and I have lots of leisure time.

I compare myself with some of my friends who are well off, and I would never trade places with them. Materially, they have everything, yet, they work 8 hours per day, in stressful jobs, commute one hour and then they are too tired to enjoy their lives. If they are too tired, all their money becomes useless.

For me, it’s possible to live comfortably with such a small amount of money because I just don’t care about buying stuff that will only collect dust at my place. I don’t have a car and I don’t have a TV. All I need is to pay for food and rent, and I am good. I wake up when I want to, and I take siestas during the day when I want to. For me, this relaxed lifestyle is more important than money. What do I do with my free time? I read, write, attend toastmasters meetings, study. These are things that many rich people wish they could do, but they can not afford because they are busy selling their time for money.

Imagine that you are already rich, that you already have all the money that you would ever want, then, what would you do with your life? Would you like to paint? Do sports? Write? Read? Imagine that you just work part time, you have a frugal lifestyle and you have enough time to do the things that you like to do. Isn’t this scenario much better than having lots of money, having lots of stuff, and not having the time nor the energy to enjoy your blessings?

Now, if your true desire is to have a professional career and spend 60 hours per week working, if this is what fulfills you, then, you are a lucky person. You get to do what you want and get well paid for it. Then, all your financial rewards are almost meaningless, because your true joy is to exercise the career that you love.

Although earning money should not be the primary purpose of our life, we do have to recognize the importance of money, especially when planning for our future.

Recently I had a conversation with a friend of mine. She is a talented artists. Our conversation went something like this:

-You know, I am a talented artist who has done many amazing things. How come I have to constantly reinvent and promote myself? How come people are not running up to me begging for my services?

In any profession, we are only as good as our last project. Clients, customers, employers, they all have this mentality: “What have you done for me lately?” So all of our previous achievements are easily forgotten. Out of sight, out of mind. And here comes the importance of living for today, but putting something aside for the future.

Let’s say that you do the most amazing performance at your job. You are congratulated and you are rewarded appropriately, but one year from that day, your accomplishment has been practically forgotten. 5 years later, it is as it never happened.

On the other hand, when you make a point to save something for the future, the money that you save can continue rewarding your accomplishment for decades to come.

Lets say you do a fantastic job at something, and you are rewarded with much recognition and $5,000. You spend $4,000 and save $1,000. Well, that $4,000 will be gone forever once you spend it, but the other $1,000 will continue producing and thanking you for years to come. Let me show you:

Assume that you can invest your $1,000 and receive 8% gain on it per year, this is what it will look like:

One year $1,080
five years $1,469
Nine years $2,000

You see, your amazing job does not exist in anyone’s mind after 9 years, but your bank account considers it twice as valuable.

How to put this mentality into practice?

The first thing is to meditate and to discover what is really important to you, your true wishes, what society expects of you.

After you have determined your goal, make a plan. How can you get there? How can you do the thing that you love and still be able to provide for the future?

Once you have made your plans, consider that you will be thrown off track many times. This is normal. Imagine that you are an airplane flying from one city to the other. The wind will be constantly taking you off course, but you will continue readjusting and eventually you will arrive at your destination.

Constantly evaluate your performance. Every time you feel tempted to buy something, ask yourself this question: Do I really need this in my life? Do I value this thing more than the security and protection that cash can provide me in the future. If the answer is yes, then go ahead and buy it. If the answer is no, then forget about it and leave that cash in your bank account.

Finally, don’t stop living because you want to plan for the future. Go ahead and buy yourself a beer or a latte from time to time. Go to the movies or on a date. Live the present, but don’t’ forget to put something aside for the future.

I love coaching and I think that I am good at it. If ever you want to book a session, feel free to contact me through my website. As a coach, I will help determine where you are in life, where you want to go, and I can help you draft a plan to achieve your objective.

Please connect with me via Facebook, LinkedIn, Twitter or Google +

Book review: Market Wizards by Jack Shwager


MarketThis book had been on my reading list for almost a year. I was lucky enough to find it at my favorite second hand store for only $3.

The book is a compilation of 17 interviews. 16 interviews of  top traders and one interview of a psychologist who focuses on helping professional traders. The book was originally published in 1989, so we don’t get to read how those top traders did during the most recent economic crises.

Some initial observations: All the traders are from the United States. I am sure that there are excellent traders in other parts of the globe. Maybe Mr. Schwager wanted to keep it simple by staying in The United States. Another observation is that all the traders are male. I hate to stereotype, but I have noticed that there are not that many women who work as professional traders.

The stories collected were incredible. Many of the traders interviewed went from trading a few hundred dollars to becoming millionaires or managers of multibillion dollar portfolios.

Although each story on its own was interesting, when you put all of them together, they all begin to sound like the same story. For example, Michael Marcus started trading with $700 and retired with 80 million dollars. Bruce Kovner borrowed $3,000 from his credit card and now has over $4.8 billion dollars. All the other traders have similar stories. They all went from very little to an incredible amount of money. They all are fanatic about trading at the expense of everything else in their lives. All of them gave practically the same advice: “You have to work hard. You have to do your homework.”

There were two stories in particular that I found very valuable; the one of William O’Neil, and the one about David Ryan. They did not talk so much about how they became successful, instead they explained their process in becoming successful. Although the purpose of the book was not educational, I felt that I learned something reading those two chapters.

Overall, I give the book four stars out of five. The material was excellent, except that after a while it became too repetitive.

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Don’t waste your money on expensive wine.



wineWhen I taste this Cabernet Sauvignon, 2003, what am I tasting? The grapes? The tannins? The oak barrel? or the price?

I have a question. When you have two bottles of wine, one costs $50 and the other one costs $10. Is the $50 bottle five times better than the $10 bottle? or is it better at all?

Brian Dimarco, a well respected wine distributor, presented random participants with two bottles of wine, each containing the exact same wine. They were told that one bottle was worth $50 and the other was worth $10.

After the participants tasted the two bottles, all the participants agreed that the $50 bottle tasted better.

But of course, those were amateurs. What do they know, they were confused by the price label. Certainly experts would not make that mistake. Or would they?

Since many of us don’t have enough knowledge to judge an expensive wine from a cheap wine, we rely on the expertise of writers from magazines like “Wine Spectator.” Not only do they taste each individual wine and give us their opinion but they also review the wine list of many restaurants and tell us which restaurants have the best wine lists. Or do they?

This was the question posed by writer and researcher Robin Goldstein.

In August 2008, Mr. Goldstein created a fake restaurant in Milan, Italy, called Osteria L’intrepido. He created a fake menu, a fake website and a fake voicemail message saying that the restaurant was closed for vacation.

As for the wine list, Goldstein made that up too. He chose several wines which had received low ratings by this magazine, Wine Spectator.

Mr. Goldstein sent all this fake information to the magazine and a real money order for $250 for the registration fee. What he wanted to test was whether you had to have a good wine list to win an award of wine excellence? Well, to the surprise of Mr. Goldstein, he did win the  award of excellence and he was pitched to buy advertising in the magazine next to the award in the following issue of the magazine.

Ok, they were biased because they wanted to make some money, but real experts would not make that mistake, or would they?

In 2001, Frederic Brochet, from the University of Bordeaux, invited 57 wine experts to evaluate two wines, one red and one white.

The experts described the red wine as: “Intense, deep, and spicy.” while the white wine was described as “lively, fresh, and floral.” It turns out that they were drinking exactly the same wine. They were both white wine, except that the red was in reality white wine with red colorant.

It is my believe that when you buying an expensive bottle of wine, you are buying a cheap bottle of wine packaged with a good story around it. My advice for you to buy a cheap bottle of wine plus a movie of a good book and you will be getting much better value for your money.

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You don’t need money to start a business


One of my favorite topics of conversation is business and how businesses are created.

Many of us have heard the phrase: “It takes money to make money.”

That is not true. You don’t need money to succeed in business. Many of today’s business leaders, From John D. Rockefeller to  Mark Zukerberg, started with $0. What they had was a determination to succeed, a belief that their goals could become a reality.

Today, I’d like to show you, with three simple examples, that anyone can succeed in business if they are determined to do so.

I’d like to start with my case.

Last November I did a business deal. My total investment was zero dollars, my time invested was about 60 hours and the potential outcome of this deal is about a quarter of a million dollars. And the most beautiful thing is that this transaction can be repeated over and over again.

Let me explain.

Last year I wanted to invest in real estate. I found a beautiful condo in the Plateau which was already rented to some McGill students. I decided to buy it, but I had one problem, I didn’t have any money. I asked some friends for a loan to use as a down payment. Once I had the money for the down payment, I asked the bank to lend me the rest of the money, which they did. In other words, the money out of my pocket was zero. And since the property was already rented, the risk was almost zero as well. Here I put together a simple deal, with no money, very little risk and the potential gain is about one quarter of a million dollars, which is the value of the condominium.

The major ingredient to do this investment was to have a belief that it was possible.  No money out of my own pocket was necessary.

The next example is my friend Christopher Lavigne.

Christopher is only 24 years old. He’s the owner of Jour 7 communication, an advertising company that is one of the biggest in Quebec. Christopher sells and upkeep Facebook pages for small businesses

Christopher started his service before investing in a business card. Imagine that, he didn’t even invest $20 in business cards. He and his partner went from door to door, offering their services. Once clients paid them, they provided the service and re-invested the profit back into the business. Christopher created this company without any money out of his pocket.

How did he accomplished this? He believed that it was possible and he just did it.

My last example is Sir. Richard Branson, the creator of Virgin Airlines.

How many of you have heard of Virgin Airlines?

Many times, when Mr. Branson wanted to go from London to New York, he found that all the seats were sold. This frustrated him, so he decided to create his own airline. He built a website, he sold the tickets in advance, without having an airplane, then he rented an airplane and hired a pilot. He carried the people across the ocean and then he paid his bills. He repeated this process over and over again and reinvested the earnings back into the business. Notice that Mr. Branson didn’t risk any money. He only rented the plane once he had sold the tickets. His risk was zero, his investment was zero and the the outcome was spectacular.

How did he accomplish this? He believed that it was possible. He didn’t need any money to start an airline.

Dear friends, These opportunities are available to all of us. First of all, we have to develop a mindset of abundance, a belief that whatever we desire we can achieve. Then how we find opportunities will depend on our unique talents and creativity.

Once you embrace this kind of thinking you will find that anything is possible.

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How I will make one million dollars in real estate


Sometimes you just have to bend over and pick up the money off the floor.
Sometimes you just have to bend over and pick up the money off the floor.

Life without a plan

All my life I have wanted to be a millionaire. So far, I have failed and to be honest, the gap between wanting to be a millionaire and doing something about it, has been quite wide.

I have always been a mediocre student with grades ranging from Ds to Bs. I had many odd jobs. I have worked as a janitor, busboy, store clerk and so on.

I consider my college degree to be a complete waste of my money, time and energy; but it did give me a student visa to come to Canada and to stay here for at least 4 years.

After graduation, I worked as a financial adviser for one of Canada’s big financial service firms, but the work made me feel dirty and dishonest. We were never focused on helping the clients; we were always focused on earning fat commissions. I quit after only 9 months.

It was then that I started day trading. The serotonin created in my brain after a few big wins was enough to keep the hope going for many months. I day traded for almost 10 years. To this day, I still don’t know if I would had been better off just parking my money in a market index mutual fund.

My other endeavor was teaching dance classes. What a wonderful job. It created a steady flow of cash while it helped me create a rich pool of friends and kept my body in shape.

After many years of teaching dance and daytrading, I decided to get into the short term rental business. With my own capital I bought one condominium and with borrowed capital I bought a second condominium.

The real estate method

My formula for becoming a millionaire is quite simple: Buy four condominiums, each one of them worth about $250 000 for a total investment of $1,000,000 investment. Then rent those condominiums to long term tenants. The monthly rent received for the condominiums would pay the mortgages and provide a bit of cash flow.

As the years pass, property owners are allowed to increase the rent to the rate of inflation, but the amount of their mortgages doesn’t go up. I could use this opportunity to increase rent, increase my cash flow and, at the same time, increase the regular payments to the bank.

If I increase the regular payments that I make to the bank every year, I should be able to pay off all the mortgages within 15 years instead of the regular 25 years.

To implement this strategy, I would buy one condominium per year. As mentioned before, I have already bought two, so I am already half way there. In two more years, if I buy one condo per year, I will be set to own one million dollars in property. Within 15 to 20 years all the condominiums will be all paid off and I will have achieved my goal of making one million dollars in real estate.

Next week I will write a blog about how to make one million dollars in the stock market. My real life scenario will probably be a combination of the two methods.

Sponsors:

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10 tricks to cut your expenses without cutting your quality of life

Couple eating at restaurant
At Beauty’s. Great breakfast for little money.

There are two ways to increase wealth:

  1. To earn more money and
  2. To spend less.

I prefer to build wealth by earning more because there is practically no limit to how much a person can earn. On the other hand, you can only cut expenses so far. Eventually everyone has to eat and sleep somewhere. All that being said, there are many ways in which a person can cut unnecessary expenses without diminishing their lifestyle.

I want to clarify that being frugal is not being cheap, it just means getting better value for your money.

  1. This is a comment from a reader, her name is Lorrie: “No cable bills; just Netflix and free streaming sites. No land-phone, just a smartphone and the REALLY reasonable MagicJack ($20 a year for free long-distance across North America).” I’d like to add that with Google Voice you can call phones all across North America for free and with Viber, you can call from your cell phone to someone else’s cell (for free) anywhere in the world.
  2. When looking for a mortgage, many people go to their regular bank, not realizing that by shopping around they can save thousands of dollars.
  3. Buy a used car. It’s a much better deal than buying a new car. If you buy a car and sell it the next day, the car is still valuable, but the price drops dramatically. I find that the sweet spot for buying a used car is four years. At four years old it’s no longer considered new but it could last you for over a decade.
  4. Sometimes the main difference between an expensive restaurant and a less expensive restaurant, is just that, the price, nothing else. When eating out, go to restaurants which give you better value for your money. Also, choose restaurants where you can bring your own wine.
  5. Comment from another reader: “Buy at a fripperie (second hand store).” I really like this advice. I have bought so many books, dishes, furniture and some clothing at second hands store. The satisfaction of buying something for a quarter or its original price can last for years. I shop at Le Chainon.
  6. A big way in which many of us can save lots of money without making any sacrifices, is by buying generic products rather than brand products. When at the supermarket, just buy the store brand. Most of the time it’s exactly the same product with a different label.
  7. When traveling, use Airbnb instead of a hotel. You get so much more for so much less. Use Uber instead of a taxi. Eat at people’s house with Eatwith.com.
  8. If you are a smoker, a habitual drinker, or a drug user; reducing or eliminating these drugs will be a great benefit to your health and to your budget.
  9. When considering an education, take as many free online courses as possible, then find classes at your local community college, and then and only then, go to a university.
  10. When getting together with friends, consider potlucks at the park or at your house or the house of one of your friends. This is a great way to socialize and have a great time for very little money.

This list is only a start. I am sure if you think about it for a few minutes, you could find ways to cut your expenses without cutting the quality of your life.

Additional advice from our reader Ivan Murcia, Coach & Business Consultant, http://about.me/ivan_murcia

  • “Shopping & Selling on Kijiji, Amazon.ca and the new Amazon Subscription  where you can have excellent products, save time and money plus delivery included! There is also Alibaba if you want to have different quotations or buy directly from the factory.”

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Book Review: Outliers by Malcolm Gladwell


ouliersThis book was a gift from from my co-host and business partner Cheryl.

There are some chapters which I found to be a great read and some chapters which I found long and boring.

The introduction: “The Roseto Mystery,” tells us about this little Italian town in Pennsylvania where people die mostly of old age. “There was no suicide, no alcoholism, no drug addiction, and very little crime.” It turns out that the reason for this small town’s well being is that they have a strong social network. The takeaway here is that one of the best thing that you can do for your overall health is to give priority to the quality and quantity of time with family and friends.

In The Matthew Effect (or accumulated advantage), Malcolm explain why most of the Canadians best hockey players are born in January, February and March. The reason is that the leagues of teams are determined by calendar year. So a kid born in January is older and bigger than a kid born in December. Since the kid born in January is more mature, he is considered a better athlete and he gets extra coaching and extra practice and he does become a better player, therefore becoming a self fulfilling prophecy. Other than being an interesting fact, I don’t know how to use this information.

The 10,000 Hour Rule. I believe that this is the chapter that made this book famous. In principle it’s easy to understand. People who have 10,000 hours of practice in any particular activity, become experts in those activities and eventually they get a break which catapults their careers and makes them famous and successful. Some of the examples are Bill Joy, co-founder of Sun Microsystems, The Beatles, Bill Gates, etc.

I wonder, what happens to the people who practice over 10,000 hours and never become successful in their fields? And people who became famous and successful without paying their dues.

Malcolm tries to democratize success. As he explains the series of particular events which occurred in Bill Gates’ life, he implies that Bill Gates had many lucky strikes which contributed to his success. Unfortunately, he discounts character, perseverance and determination. Bill Gates was lucky to have affluent parents and to have access to computers when practically no one else had access to computers. But Bill Gates had to use one of those computers between 2 to 6 am. in the morning. As a teenager, to have the ambition and the determination to get up every night to use this computer, in my opinion, shows that his character had a bigger roll in his success than his lucky chances.

Of course, the examples that disprove the 10,000 hour rule are abundant. Sir Richard Branson created one of the most successful airlines without knowing anything about airplanes, the rock band The Sex Pistols became a great success even if their musicians could barely play their instruments.

In The Trouble with Geniuses, Malcolm proves that being smart is not enough to become successful. Smarts is no more than a factor in the equation. It does help to be smart, but many other factors can become more important. “Intellect and achievement are far from being perfectly correlated.” Another factor which is considered more important, is the upbringing of a child, and he explains the concept of “Concerted Cultivation.”

This chapter makes me feel hopeful because I don’t consider myself an intelligent person, yet I like to think that I have a chance at being successful in life.

In The Three Lessons of Joe Flom, Malcolm tells us the story of how Joe Flom, a Jew,  became a prominent attorney in New York City. Malcolm attributes this success to the fact that Joe could not get a job working at any of the well known firms in New York City, simply because he was Jew. So Joe opened his own law firm in association with other Jews who also were discriminated against. Joe et al. ended up doing the kind of work that no other law firm wanted to do, mergers and acquisitions. When merger and acquisitions became popular, Joe et al., were at the top of the pyramid and they became among the most successful law firms in New York.

What is the lesson here? to become a well known, high paid attorney you have to be Jew and be discriminated against? Maybe to become a good gardener in California you have to be a Mexican immigrant? To become a good maid you have to an immigrant from the Philippines?

Here are two excerpts which summarize Malcolm’s attempt to democratize success:

“Successful people don’t do it alone. Where they come from matters. They’re products of particular places and environment.”

“The sense of possibility so necessary for success comes not just from inside us or from our parents. It comes from our time, from the particular opportunities that our particular place in history presents us with.”

True in most part. You have a higher chance of success if you live in the U.S. than if you live in Ethiopia. But there is a point in which we have to acknowledge the character and personal ambition of each individual.

In the chapter “Harlan, Kentucky”, Malcolm explains why people from the South of the U.S. have a hotter temper than people from the North. My question is: How is this relevant to me. This chapter suggest that we are the sum of all the generations before us. I agree with Malcolm, but was not able to figure out how to use this information.

The Chapter “The Ethnic Theory of Plane Crashes” is one of Malcolm’s favorites. He claims that airplane pilots from countries which have pronounced social hierarchies have more airplane accidents than airplane pilots from countries with less pronounced social hierarchy. The reason given is that the copilot is less likely to question the actions of the pilot.

This chapter was 47 pages long. He could have made the same point in 2 pages.

In Rice Paddies and Math Tests, Malcolm claims that there is a direct relationship between countries that farm rice, such as Japan, Korea, Singapore, and Taiwan and the outstanding math results that kids from those countries achieve.

On the surface, this seems plausible, but then how does he explain that kids from India, Indonesia, Vietnam and many other countries in Southeast Asia, which are major rice producers, don’t do as well in math exams?

Marita’s Bargain turned out to be my favorite chapter and the only one with information that I can put to use. He uses a case study of KIPP (Knowledge Is Power Program). KIPP is a national network of college preparatory schools in under-resource communities throughout the U.S.

What makes this network special is that the students spend more time in school every day and they have shorter summer vacations, therefore giving its students the edge of extra preparation. I see the logic in this chapter, the more that you prepare, the higher the chances of success.

The last chapter A Jamaican Story, was Malcolm’s autobiography. He shares with us the origin of his ancestors,  from the racial mix of a white landlord and a slave woman in Jamaica, to the present time when Malcolm has become an accomplished writer living in New York City. Malcolm finds a way to thank his grandmother Daisy for the sacrifices that she endured in order to get an education for her daughter (Malcolm’s mother), who in turn provided an education for Malcolm.

In short, I found the book highly entertaining and I appreciated the nuggets of information through the pages. At the same time I will not go out of my way to recommend this book. For each anecdote that proves the points he is trying to make, there are many anecdotes which prove the contrary.

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How to stay motivated to save money

Happiness and frugality together. We are having a great time. The park is free the food is not expensive and no one is wearing luxurious clothing. We all can have fun with little money.
Happiness and frugality together. We are having a great time. The park is free the food is not expensive and no one is wearing luxurious clothing. We all can have fun with little money.

We all know the formula to create wealth: “Spend less than you earn and invest the rest.”

But how do we stay motivated? how can we fight the urge to spend beyond our means?

Here are my solutions:

1. Trigger points.

The main trigger points are social pressure and media manipulation.

Social pressure: Here is a simple example. You work in an office where everyone looks like a magazine model… It is easy to feel the pressure to buy new and expensive clothes to  be the same as all the other co workers. There are many more instances where social pressure plays a big role in your spending behavior. The best thing is to be aware that you don’t have to be like everybody else. It is ok to say “no” from time to time. You don’t have to have a big house, you don’t have to own a luxury car, you don’t have to attend your best friend’s wedding in Hawaii. You can be a bit different. You can be known as the person who saves money. Many of us strive to be different, this is your opportunity.

Media Manipulation: Advertisers will tell you to buy their products  “Because you deserve it!” How can you argue with that? You work hard, you are under a lot of stress and yes, you feel you deserve that new item.  The solution for this is to always be aware that the job of advertisers is to manipulate you, that there are psychologists and sociologists who are getting paid thousands of dollars to influence your buying decisions. They will spin a story to play with your emotions, to make you desire the lifestyle that their products offer. Question their offers and keep your emotions in check.

I have become immune to social pressure. I practically don’t care about exhibiting social symbols. I ride a bicycle, I live in a modest apartment and I prefer to dress in shorts and sneakers. As for media manipulation. I simply don’t have a T.V. nor a radio nor do I read newspapers.

2. Make savings a ritual.

Have you heard this saying, “Pay yourself first?” You can simply ask your bank to take money out of your checking account and put it in your savings or investment account every month, then you will be a habitual saver. There are two ways of doing this:You can decide to put aside a percentage of your earnings, let’s say 10%; or you can put aside a determined amount, let’s say $1000 per month.  The final goal is that you don’t have to think about it, savings will become a habit that you will do unconsciously.

Every month there is an automatic transfer from my checking account to my savings account. I follow my own advice.

3. Visualize the future.

This step is more complicated. You will need a financial calculator or the help of a professional.  Try to predict until which age you will live. Let’s say you will live until age 95. Then decide at what age you want to retire. Let’s say at 65. Now you need to figure out how much money you will need to live for 30 years without working. Once you have figured out this amount, then you have to decide how much you need to save every year. This exercise should be done at least once per year.

My personal goal is to have one million dollars by the age of 60. What is your goal?

Many people commit the mistake of thinking (or hoping) that something will happen in the future that will take care of their finances. Well, yes, something might happen, but just as well, something might never happen and then what will you do? Visualize this scenario as well. How would you pay your bills when you are 80 years old and you no longer have the energy to work full or part time?

Saving money and living within your means is mostly a psychological exercise very similar to staying in good shape.

We are all capable of understanding the psychological factors that make us spend. We can learn how to ignore the triggers that make us buy one more item. We can learn how to make savings a habit that we do unconsciously. And we can learn to visualize where do we want to be financially in one year, in five years, and in 20 years from now.

Good luck.

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