Wealth Building for Beginners (Even if You Are Not Young Anymore)*

1.- Wealth Matters: You Decide How Much

Making money is not the most important thing in life. And getting rich shouldn’t be your number one goal.

But money does matter. And building wealth is necessary if you have any hope of (a) living well and (b) retiring one day.

This is true for just about everyone. And what’s equally true is that nobody – not your parents, not your spouse, not your children – is going to care about your financial comfort more than you.

That’s the way it is. Forget about the mental bullshit you hear from social idealists: that everyone deserves a “living” wage and that it’s the government’s job to “even out” the wealth gap.

The truth is that we are all born into this world naked, nearly helpless, and without any guaranty of being taken care of by others. As soon as we are able, we must learn how to fend for ourselves.

You may not like to think about money. But like it or not, you and you alone are responsible for your financial situation. And your financial health will affect your ability to enjoy every aspect of your life.

This series of essays is meant for relatively young people, and the younger you are the more powerful the secrets you learn here will be. But it applies to older people too – people in their 30s and 40s (and even 50s) that have not been successful at building wealth and want to start fresh with a proven plan.

The strategy I’m going to give you is not remarkable in any way. And there will be few aspects to it that will strike you as especially clever.

The reason for that is important. “Clever” financial strategies are almost always complicated and expensive. They work very well for the financial professionals that sell them to you. But they rarely if ever work for you.

I sometimes talk about financial “secrets.” But the truth is, there are no secrets to building wealth. There are universal principles – powerful, eternal principles – and there are tried and true practices that work. The thing is that 98% of the investing population ignores them.

It’s true. If you have the good fortune to be under the age of 40 and are of average to above-average intelligence, the “secrets” to becoming wealthy are no more difficult to grasp than the secrets to playing poker. Or playing the trumpet.

And that’s why, as you read what I have to say here, you may find yourself thinking, “I’ve heard that before.” And “I know that.”

Well you probably have heard it before. Because if you’ve been reading about wealth building for any length of time, you’ve been hearing about the most successful wealth builders in history.

But hearing something and knowing it are two very different things. My purpose in writing this series of essays is not just to teach you what I’ve learned but to tell it to you in a way that will motivate you to do something with it. To try out some of the strategies and techniques I’ll be recommending. To get the knowledge of them from your ears to your brain to your gut.

I want you to know the truth of these principles and strategies deeply – and eventually I want you to know them reflexively. So that your day-to-day decisions about your career and your investments will come naturally to you. So you will make the smart moves and avoid the most common mistakes.

When you get to that point, you will find that your net investible savings (my definition of financial wealth) will increase steadily. Somewhat slowly at first but at a more rapid pace as the months pass. And one day you will realize that you are making more money passively than you are making from working. That is the day you will look back and be glad you took this step.

This was my experience. And it was the experience of dozens of people I personally mentored, as well as hundreds of people that came to my lectures or read my books and wrote to me. People such as:

  • HP, who was stocking shelves in a supermarket when I met him and now earns more than $400,000 a year
  • SP, a recent college grad making $14,000 a year who went on to build a business that gave him a net worth of approximately half a billion dollars (and still growing)
  • RP, who had just gotten out of jail when I began mentoring him, and who now lives in a multimillion-dollar house and enjoys a fantastic lifestyle working less than 30 hours a week

(These are just three. I’ll tell you about dozens more in future essays.)

None of these people did anything extraordinary or had any special luck. They just faithfully followed the rules you will soon learn and found that their wealth increased almost automatically.

What I mean by “Automatic Wealth”

Some years ago, I wrote a book titled Automatic Wealth that made it to some of the bestseller lists. The thesis was simple. Most of the world – and I include doctors and lawyers and college professors in this group – work their tails off throughout their lives, struggling to make ends meet, and end up with little or nothing to show for it. But some people – including many that aren’t well educated and have no family connections – seem to find a way to escalate their income and their savings year after year so that it starts to build automatically. Like they have a printing press in the basement.

You might know people like this. If you do, I’m sure you would agree with me that some of them are not particularly bright or even financially sophisticated. They are plumbers and car salesmen and small business owners and people that make money by selling things on the Internet.

I know lots of these people and I can testify: Many of them have very ordinary minds. Ordinary in terms of academic intelligence. But they have learned something in their guts – a sort of emotional intelligence – that they apply to their careers and their investments. And it’s this reflexive knowledge that has allowed them to build the wealth they have built.

Again, I’m talking about a dozen or so principles and practices that you will find easy to understand and, if I do my job, easy to put into practice until they become automatic.

When you get to the automatic wealth building stage, things get much easier. I don’t know when I got there exactly. I’m sure it took me longer than it will take you. But I can tell you this: When I got there, I no longer thought about making money. I no longer had “make more money” on my to-do-next-year list. I was able to pay attention to other things – my family, my friends, and my hobbies. And the machine kept on going.

That’s what I mean by automatic.

Now let’s back up for a moment and deal briefly with the other word: wealth. What does it mean to be wealthy?

I’ve asked countless people for their definition and have received many interesting answers. Among them:

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Why You Need a Good Editor, or… How to Edit Yourself When You Don’t Have One

His email was clever and funny. So too (I thought) was my response. I put the two together and sent it to my editor as a witty brief for publication in this little blog.

“I think this is pretty clever,” I wrote, “but I may be kidding myself. I know that sometimes I’m too close to my stuff to know.”

She wrote back: “You’re kidding yourself.”

Here’s the thing: I’ve been trying to “become a writer” since I was in grammar school. I’ve published more than two dozen books and more than a thousand essays. For the last 17 years, I’ve been writing every day. And yet 90% of what I write is garbage.

By garbage I mean not worth saving, let alone publishing.

Today, thanks to the Internet, it’s easier than ever to become a published writer. If you can’t get your work published by any one of the tens of thousands of websites that publish content every day, you can create your own website and self-publish.

But that presents a problem. It’s easier than ever to publish garbage.

In the “old days,” it was difficult to have your work accepted for publication. And if you did, you still had to go through a gauntlet of revisions mandated by an editor – someone whose job was to make sure no garbage went to press.

But these days, very little revising is being done. And that’s because most writing is published without the benefit of a good editor.

I happen to have one. She’s been editing my work – my business essays, my books, my fiction and my poetry – for more than 25 years. I’m lucky. Most writers don’t have that benefit.

What if you don’t? What can you do?

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The Exposure Explosion

You Think Sexual Harassment Is News? Really?

Men – mostly powerful white men – are being exposed as sexual predators. They are being punished by losing their jobs, their reputations, and, in some cases, their families and friends.

Like the presidential election, it is freaking people out and polarizing the population.

First it was Harvey Weinstein. Then it was Louis C. K., Kevin Spacey, Al Franken, John Conyers, and (gasp!) Matt Lauer.

Hardly a day passes without another well-known name being added to the list. And it’s not just celebrities and politicians. Gavin Delahunty, chief curator at the Dallas Museum of Art, resigned after allegations of inappropriate sexual behavior. James Levine, the world-famous conductor, was suspended by the Met Opera after three men accused him of abusing them when they were teenagers.

The liberal press was the first to jump on the “news.” Conservative commentators were initially quiet on the subject, but began speaking when a significant number of the accused turned out to be liberals.

So we are all talking about it now.

It was never really acceptable. But some of it sort of was.

For the first 30 years of my life, sexual harassment was not something people talked about. I doubt if the phrase was even used until the 1980s when workforce regulations and laws were put into place.

As for “inappropriate behavior” creating a “hostile work environment” – I don’t remember that being an issue until around 2000.

But for what we might call “hard core” sexual harassment – trying to exchange workplace rewards for sexual favors – that was always considered repulsive. It was also, however, regarded as somehow “to be expected,” at least in Hollywood and on Wall Street.

How many cartoons have been published over the decades – even in dignified liberal-leaning publications such as The New Yorker – depicting the Hollywood powerhouse and the starlet on “the casting couch”? Or the boss chasing the typist around the room?

A young person today might well wonder why this sort of behavior was considered a laughing matter.

One reason, I think, is that there was, until relatively recently, a very different view of male and female roles when it came to sex.

The man’s role was to pursue the woman. The woman’s role was to be pursued.

The man was expected to want to have sex whenever he could get it. The woman was expected to refuse a man’s sexual advances, and to make only small and gradual allowances depending on her assessment of his attractiveness and worthiness. (Not necessarily in that order.)

Women who initiated sex or said yes too easily were considered whorish. Men who were persistent in asking for sex were considered normal – “red-blooded” at the worst.

And now, as the exposures and admissions and expulsions continue, it is pretty much impossible for anyone to pretend that this double standard has not been a real and serious problem since… well, certainly since the Mad Men days. Arguably since 1492.

So why does it feel like sexual harassment in the workplace is something new?

Until recently, the behavior that men are now being punished for was accepted… or at least ignored. And as long as it was ignored, some men felt that it was somehow okay.

I can think of several contributing factors:

  • Although it has always been illegal as well as reprehensible to rape, fondle, or act out sexually in front of one’s colleagues and employees, there was always some allowance given for the lesser of these offenses when the victims were single women – i.e., not some other man’s wife.
  • And when it came to Hollywood and Wall Street, the idea that a powerful man might persuade a single (i.e., available) woman to grant him some sort of sexual pleasure by offering career benefits was considered a form of mutual consent. (After all, the woman could always say no.)
  • Casual sex – i.e., sex outside of marriage – has gradually become thought of as ordinary. And the idea of a woman having such sex has evolved from something to be ashamed of to something she has a perfect right to.

So how far can a man go?

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Dressing Like a Billionaire


“Clothes make the man. Naked people have little or no influence on society.”

– Mark Twain

The very idea of dressing like a billionaire is implausible to the point of being silly. Billionaires, after all, are not generally thought of as being particularly well dressed.

Warren Buffett, for example. He wears suits that seem to be bought off the rack at some Omaha discount store. His glasses say “These babies work!” His most prominent stylistic feature is the incredible growth that is his eyebrows.

Still, he doesn’t look all that bad. He looks like a rich guy who is comfortable dressing like a working-class joe. And that’s the image he wants to project. So good for him.

Steve Jobs was even more challenged when it came to dressing. His sartorial choices left him looking confused. Was he a boy or a man? Was he a visionary or a geek?

So why should you want to dress like a billionaire? The answer is that you shouldn’t. Your goal should be to dress well – really well – as well as you could if money were no object.

And, you will be happy to know, you can do that without spending a lot of money.

Why Bother?

If you have a billion dollars, you can dress like Warren Buffett and people will still respect and admire you. But if you have ordinary wealth (that is to say, not a lot), dressing well has its advantages.

First and foremost, dressing well makes you look better. If you are chubby, it makes you look slimmer. If you are short, it makes you look taller. If you are tall and thin – hell, if you are tall and thin (and young), you look good in anything. You can skip the rest of this.

Except that dressing well often makes you feel good. For me, what I put on in the morning has a lot to do with the way I feel about myself when I wake up. If I am full of energy and enthusiasm about the day, I take a bit of time to select clothes that please me. If I’m feeling down on myself for whatever reason, I select clothes that make me feel dumpy. (Why do I still have such clothes in my closet? Good question. I’m working on getting rid of them…)

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Dividends: Not Life’s Greatest Joy But Great for a Worry-Free Retirement

Marc Litchenfeld tells me that John D. Rockefeller once said that what gave him the “greatest joy” was seeing dividends flowing into his bank accounts.

Dividends are income – i.e., cash flow you’ve earned from investments.

Rockefeller was probably the richest man that ever lived. His dividend income was enormous. Yet I hope he was exaggerating to make a point. How depressing to be filthy rich and value money as your greatest pleasure. That’s a gray, lifeless limbo of existence. Scrooge McDuck territory.

Still, I can imagine situations where income matters a lot.

Let’s say you are a single parent making minimum wage, about $1,600 a month. Your apartment – a beat-up one-bedroom condo in Miami – costs you $1,100. An extra $100 to $400 a month? Yeah. That would be sweet.

Or let’s say you are retired. Between your pension and your and your spouse’s Social Security, you have $4,200 a month. Your monthly nut is $4,100, leaving you a measly $100 for fun and/or emergencies. What if you could bring in another $600 to $1,600 a month? Would that help?

Most financial brokers and advisors focus on “rate of return” when they talk to their clients about investments. Not because they care about their clients but because they know that’s what their clients want.

They know that their best clients (usually retirees with significant stock and bond accounts) want high returns because, for them, a return of 12% rather than 4% means the difference between prime rib and hamburger.

They also know that the easiest way to sell their clients on big returns is with growth stocks (even penny stocks), junk bonds, short selling, stock options (e.g., buying puts), and other forms of speculation (yes, including bitcoins).

They know the financial media will devote 90% of its coverage to those investments so they don’t have to push too hard to get you into them. They merely have to provide you with the opportunity to chase returns and make you sign wavers (that you don’t bother to read and don’t take seriously) when you are investing in a way that is clearly idiotic.

What the financial community should be doing is telling you some basic truths.

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Robert Mugabe’s Career How to Bankrupt a Country and Keep It Poor for 40 Years

On November 21, Robert Mugabe, Zimbabwe’s authoritarian ruler, was forced to resign in the wake of a military takeover. Emmerson Mnangagwa, who had been Mugabe’s right-hand man was sworn in as president, and Zimbabwe’s long-oppressed citizens took to the streets to celebrate. But little, if anything, is likely to change.

In 1975, I was teaching English Literature and Philosophy at the University of Chad as a Peace Corps volunteer. That same year, a thousand plus miles south in Rhodesia, Robert Mugabe was released from prison.

He had spent 11 years behind bars for his leadership role in the Zimbabwe African National Union, which was working towards peaceful independence from British colonial rule.

When he got out of prison, Mugabe was no longer a pacifist. He became one of the main leaders of the Union’s guerrilla forces. When Rhodesia won its independence in 1979 and became the Republic of Zimbabwe, he ran for prime minister. Under the banner of “peace and unity,” he promised to support the country’s white citizens and protect their property while promoting the welfare of the native African population. That position got him elected by an overwhelming majority.

I was writing for a publication called African Business & Trade at the time. I remember thinking that Mugabe’s vision for Zimbabwe was a great one. Along with most of the international press, I supported him.

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Ho hum. Another Speech About Money or… How to Make Money and Enjoy It

I hate making speeches – and for good reason. I don’t prepare for them. I ignore them until a week or two before the event. Then I suffer anxiety that rises in a crescendo until the speech and then, afterwards, drops me into a slough of regrets.

To make matters worse, I’m always asked to talk on the same topic: money. Gets boring after a while.

Right now, I’m on an American Airlines flight to a conference in Sao Paulo to talk to several hundred people about money. I asked the host of the conference what, exactly, I should speak about. He said, “Talk about anything you want. These people know who you are and they love you. It doesn’t matter what you tell them.”

That – the idea that this anonymous mass of people “love” me – helped. I felt validated. And gratified for the opportunity. So what could I say to them about money to reciprocate their good feelings?

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A Monthly Budget That Will Help You Grow Rich

Most people don’t manage their income. They bank it and spend it. This is obviously crazy.

Some people do try to manage their income by budgeting. This typically means that you look at what your income is likely to be. You subtract mandatory expenses. Then you make spending decisions based on what’s left.

“Hmmm… I’ve got $2,800 coming in this month. The mortgage is $1,400. The utilities will be around $300. I’ve got to pay $200 for the minimum on my credit cards. That leaves $900. Oh, but I forgot the car payment. That’s another $250. So I’ve got $650 left. That should be okay.”

 But what about that grinding noise the dishwasher is making? Or the $200 you promised you’d lend to your brother? And wait! Isn’t your anniversary next Tuesday?

Making rough mental calculations is not a smart way to manage your money. If you do it very conservatively, you may keep up with expenses. But it’s unlikely you’ll ever have money left over for saving and investing. Which means you’ll have very little chance of increasing your wealth.

It doesn’t have to be that way. Creating a realistic budget should take only about an hour the first time you do it. Then a half-hour or so each month to keep it up to date.

How to Set Up a Realistic Monthly Budget

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Getting There the Hard Way: Breaking Through the Pain

I remember the day that my older boys and I had a breath-holding contest. It was my idea. I had just been trounced by the two of them in an underwater-propulsion contest. (Imagine human torpedoes bouncing off pool walls.)

“Holding our breath? You just want to do something you can win at,” No.2 son Patrick astutely pointed out. (I had apparently abused them with my breath-holding-gold-medal-at-Club-Med story several times.)

“Chicken?” I cleverly replied.

They relented. And I handily won the first round. But my time was only 65 seconds, not Club Med gold level. Two more rounds followed. I maintained a slight lead. Our times were 1:10, 1:25, and 1:30. Then, on the fourth round, something surprising happened. Patrick held his breath for 1:50 and beat us all!

It was an astonishing feat – 25 seconds better than his till-then best.

If you have normal lungs and have no experience holding your breath you can easily do it for up to about a minute. After that, it gets uncomfortable. At about a minute and a half, your lungs feel as if they might explode. Time slows. Each consecutive second lasts longer. Getting to a minute and 50 seconds meant Patrick had to endure an awful lot of pain.

Can you guess what happened next?

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Is Armageddon the New Normal?

“When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible but in the end, they always fall – Think of it, ALWAYS.”

Mahatma Gandhi

The phrase “end of days” – once so silly to me – whispers from the shadows of my mind.

For so long it was global warming – abstract and years away – and the occasional drought or storm. Now we have hurricanes, earthquakes, tsunamis, and forest fires, one after another.

The frightening but mostly remote threat of Islamic terrorism now seems like a secondary concern as our president and his North Korean counterpart threaten each other like angry schoolboys but with nuclear annihilation in the balance.

And that’s not to mention the mass murders within our borders.

We are living in a world where murder and mayhem are commonplace. Where the horror of a real war seems not just possible but imminent. And while we wait hundreds die every day.

Yet most of us must go about our daily routines. I do. But with a slightly different feeling in my gut. An alien emotion. I feel vulnerable.

I suppose it’s how Israelis and Palestinians feel. Notwithstanding the constant threat of terrorism, war, and even annihilation, they find for themselves a new normal. A way to do the things we’ve always done in the USA without fear: working, shopping, eating, and even attending outdoor sporting and musical events.

It’s unlikely that the massacres and acts of terrorism will subside unless we do something different than we’ve done so far. Which has mostly been to spend money stupidly. Stupidity, they say, is doing the same thing and expecting a different outcome.

As for the natural disasters… it’s impossible to say with certainty whether they will continue or abate. But so long as they continue, we can be certain that this shadow of doom will be upon us.

The big threat, of course, is World War III.

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