The4LawsofFinancialProsperityIntroductionDedicationAcknowledgmentsForewordALadyNamedMarySchoolBeginsTheFirstLawTheSecondLawTheThirdLawDebt-FreeTheFourthLawTablesTurnedInterestSpendingMoreMoneytoManageThe4LawsTheFinancialWellnessChallengeAuthors’FinalThoughtsAbouttheAuthors...AppendixAboutFranklinCoveyAboutTheFinancialWellnessGroup™

The4Lawsof

FinancialProsperity

GetControlofYourMoneyNow!

Justfivewordsspellprosperity,success,andhappiness—

fivewordsonly—andtheyarethese:“Spendlessthanyouget.”

—Anonymous

Whenprosperitycomes,donotuseallofit.—Confucius

The4Lawsof

FinancialProsperityGetControlof

YourMoneyNow!BlaineHarris

andCharlesCoonradt

Copyright©1996,2001,2009,2013BlaineHarrisandCharlesCoonradt

Allrightsreserved.Nopartofthispublicationmaybereproducedortransmittedinanyformorbyanymeanselectronicormechanical,includingphotocopy,recording,oranyinformationstorageandretrievalsystem,withoutpermissioninwritingfromthepublisher.

Requestsforpermissiontomakecopiesofanypartoftheworkshouldbemailedto:TheFinancialWellnessGroup™P.O.Box236Bountiful,UT84011-02361-800-245-6283www.thefinancialwellnessgroup.com

Co-publishedbyFranklinCoveyCo.

ISBN978-1-933976-86-0

LibraryofCongressCatalogNumber:96-85208

Introduction

WhenPaulSmithcan’tpayhisbills,includingminimumpaymentsonfivecreditcards,ahomeequityloan,afirstmortgage,andacarlease,hetakesamidnightstrollseekinganswerstohisfinancialwoes.

FateandastrangesetofeventsbringshimincontactwithMarySessions,aretiredIRSauditorwitha$20millionbankaccountwhotakesPaulintoherhome,danglesa$2millioncarrotinfrontofhisnoseandbeginsteachinghimthefourlawsthatmadeherdebt-freeandfinanciallysecure.

Inspiredbyactualevents,Pauldiscoversthathowmuchapersonearnsisn’tnearly as important in achieving financial security asmost people think—thatnearly anyone on any income can achieve debt-free peace and prosperity byapplyingthefourlawsinthestory.

Takingplaceoveraperiodofmonths,thereaderaccompaniesPaulasMaryguideshim,onestepatatime,downthepathleadingtodebt-freeprosperity.Bythe time thesurpriseendingunfolds, thereader,alongwithPaul,hasmasteredthelawsthatcanguideanyonedownthesamepath.

Throughanentertainingandcaptivatingstory, thisbookpresents the fourtime-testedlawsdevelopedbyBlaineHarrisforTheFinancialWellnessGroupin its financial management programs for individuals, families, and homebusinesses—making a difference for you and your loved ones today andtomorrow.

TheNextMoveIsYours!

Successfulmenandwomenbecomesuccessfulonlybecausetheyacquirethehabitofthinkingintermsofsuccess.

Definitenessofpurposecan,anditshould,socompletelyoccupythemindthatonehasnotimeor

spaceinthemindforthoughtsoffailure.

—NapoleonHill

Dedication

tothosewhowillcommittobecomefinanciallyfree

Acknowledgements

Iwouldliketoacknowledgeseveralpeoplewhohavehadaprofoundimpactuponmylife.Iwouldnothaveunderstoodthefundamentalconceptsofthisbookwithadeepenoughpassiontomakethisprojectaninternationalrealitywithouthelpfromthefollowing:

Firsttomyparents,whoarenolongerhere,forteachingmethatpersonalintegrityisinseparablyconnectedtoaccount-abilityandresponsibility.

Tomywife,Elaine, forherunquestioningfaithandsupport for thisworkandeverythingelseIaminvolvedin.

To my children, for testing, implementing, and further documenting theprinciplestaughtinthisbook.

TomydaughterMarci and son-in-lawKen, for their undying loyalty andongoingassistance in thedevelopmentofourFinancialWellnessproductsandservices.

To our staff,who have spent countless hours to support and develop therefinementsreflectedinthisbook.

To our international friends and clients, who have patiently andenthusiasticallyproventheflexibilityanddurabilityoftheseprinciples.

ToMr.ChuckCoonradt,whodevelopedTheGameofWorkandwhocontributedmuchtothepreparationofthisbook.

ToLeeNelson,whosewritingskillandbeliefinthe4Lawsprocessenabledustopresenttheconceptsandprinciplesinthisbookinaneasy-to-readandenjoyableformat.

—BlaineHarris

I want to thank my partner—that is my life partner, business partner,parentingpartner, and eternal partner—mywife,Carla,withoutwhommy lifewouldnothaveturnedoutthewayithas.

Also thanks to my children, Christina, Kelly, Christopher, Cody, andChristian—without you, none of this would have been possible or veryimportant.

Thank you to the thousands of chief executive officers and owners whohaveretainedandusedourconcepts.Thesepeoplehiredustoteachand,infact,woundupteachingme.

Thanks to Blaine Harris, for his vision and commitment to the timelessprinciplesofthe4Laws—andforhisinvitationtobeapartofthisgreatwork.

—CharlesCoonradt

ForewordbyDr.StephenR.Covey

Thisprofoundlittlebookdealswithatopicthatisabsolutelycriticaltoqualityoflifeforeveryone.Nomatterwhoyouareorwhereyoulive,formostofyourlifeyouwilldealwitheconomicissues.Andtheseissuesnotonlyaffecttheamountofmoneyyouhaveinyourwallet,yourbankaccount,oryour401k;theyalsoaffectyourrelationships,yourlifestylechoices,yourlevelsofstress,yourabilitytocontribute,andyourpersonalpeace.

That’swhy,astheauthorssayintheirIntroduction,theissuereallyisn’toneofhowmuchmoneyyoumake.It’soneof“financialpeaceandprosperity”—ofreachingapointwheremoneybecomesanenabler,notadistractor,fromthethingsthatreallymattermostinyourlife.

IfoundThe4LawsofFinancialProsperitytobetrulyuniqueandinspiringinseveralways.

It’sbasedona“wholelife”approach.

Thisbookrecognizesthatfinancialwellnessisanintegralpartofhappinessandwell-being.Unlikeotherbooksonthemarket,it’snotreactive.Itdoesn’tjustfocusonhowtogetoutofdebt.It’snotincompleteandshort-sighted.Itdoesn’tjustfocusonstrategiesandtechniquestoincreasewealth.It’saboutyourwholelife.Ithelpsyoutieyourfinancialgoalsintoyourdeepestvaluesandprinciples.Ithelpsyouhandleyourmoneyinawaythatenablesyoutoaccomplishwhatreallymattersmost.

Itstrikesatthe“root”ofmoneyproblems.

EvenasIwritethisforeword,we’reinthemidstofaglobaleconomiccrisis.We’restrugglingtodealwiththeconsequencesofthequick-fix,easy-creditmentalitythatledtoameltdownofthesubprimemortgagemarketintheUnitedStatesandthefalloutofthatmeltdownaroundtheglobe.Butaschallengingasthiscrisisis,it’sreallyonlyoneofthe“fruits”ofamuchdeeper“root”—thismentalityoftryingtoaccumulateand“manage”moneyessentiallyforthepurposeofamassingwealth.Thiswayofthinkingdisregardsthetimelessprinciplesthatgovernthepurpose,use,andmanagementofresourcestocreatehappinessandwell-being.The4LawsofFinancialProsperityaddressesthe“root”ofsomeofthe“fruits”we’reexperiencingbecauseofanonprincipledapproach.

It’sbasedontimelessprinciples.

Like the 7 Habits, the 4 Laws distill complex ideas and processes intosimple,actionableprinciplesofeffectiveness.Anyonecanfollowthese laws—Track, Target, Trim, and Train—and get positive results. The 4 Laws also

embody many of the 7 Habits themselves—especially Habit 1: Be Proactive,Habit2:BeginWiththeEndinMind,Habit3:PutFirstThingsFirst,andHabit7: Sharpen the Saw. In fact, the 4 Laws even get into the 8th Habit, helpingpeoplemove fromeffectiveness togreatness.They increaseyourability tonotonly enjoy fulfillment in your daily life, but to be in a position to contributetime,energy,andresourcesinotherareasaswell.

It’sagreattooltoincreaseorganizationalproductivity.

Having spent my career helping individuals and corporations increaseproductivity,I’vebecomeconvincedthatoneofthegreatest,unnoticeddrainsonindividual productivity is the distraction that financial stress puts on people.When up to 50 percent of employees spend 21 or more hours at work eachmonthdealingwiththestressofpersonalfinancialissues,itcan’thelpbutaffecttheir focus, decisionmaking, relationships, and creativity.This is a great littlebook tohelpemployeesachieve financialwellness and increaseorganizationalperformanceatthesametime.

It’swritteninaneasy-to-read,engagingstyle.

Notonlyisthebooksound;it’sengagingandeasytoread—whichisrarein theworld ofmoney-management literature. The story linemakes the logicmemorable and easy to follow, yet it doesn’t get in the way of helping usunderstandthattheprinciplesareapplicableforall.

BlaineandChuckdoagreatjobofinspiringusandhelpingusunderstandthatfinancialwellnessisbothdesirableandachievable.OneofthethingsIlikebestaboutthebookisthatnotonlyaretheprinciplestrue,theyareeasytoapplyandbring immediateaswellas long-termresults.Membersofmyownfamilyhaveenjoyedandlearnedfromthisbook.Ibelieveyouwilltoo.

Whateveryoucandoordreamyoucan,beginit.

Boldnesshasgeniusandmagicinit.Beginitnow.—Goethe

Donotletwhatyoucannotdointerferewithwhatyoucando.

—JohnWooden,formerUCLAbasketballcoach

Moneyisplentifulforthosewhounderstandthesimplelawswhichgovernitsacquisition.

—GeorgeClason

ALadyNamedMary

ThePaulSmithStory

ItwasalmostmidnightwhenIwentlookingforawayout,oratleastsomethingto takemymindaway frommybills.Thedeadofnighthasawayofmakingsomeproblemsseemunbearable.Itwastheworstnightofmylife.Icouldnotsitatthedeskanotherminute.

I wasn’t in themidst of a life-and-death strugglewith cancer, nor was Iembroiledinanastydivorce.Mycircumstancesweremoremundanebut,tome,

everybitaspainfulasanylife-and-deathstruggle.Itwas the timeof themonthwhen Ihad tospendaneveningatmydesk

payingbills.TheeveninghadstartedoutonapainfulnotewhenIexaminedayellowcardfromthepostofficeinformingmethatIhadaregisteredletterfromthe IRS. I didn’t cheat on my taxes, but was worried I had been a little toocreative.Iwasasalesrepforafurnituremanufacturerandalwaysseemedtobespending personal money on business without getting receipts. At tax time, Iusually gave myself a generous deduction to cover these undocumentedexpenses.NowIwassuretheyweregoingtoauditme,andeveniftheytoldmeIhad tocomeupwithanother$2,000orgo to jail, Iwouldn’tbeable to find$2,000.Pushingtheyellowcardtothebackofthedesk,hopingitmightgetlost,I prayed the custodian at the IRS would inadvertently push my file into awastebasket.

ThenIstartedthegruesometaskofpayingbills,beginningwiththesmallones.

Imademinimumpayments on the five charge cards, trying to ignore thelate feesand the smallprintdescribing financechargesof18% to25%on theunpaidbalances.

Imadeaninterest-onlypaymentonthehomeequityloan,thenexaminedarejectionletterfromthecompanywhereIhadappliedforasecondhomeequityloan.Ihadrespondedtotheiradvertising,whichclaimed:“Ifyouneedmoney,getitoutofyourhouse.Wegive100%,not80%likethoseotherhomeequitycompanies!” In the rejection letter, they said they couldn’t make the loanbecauseIdidn’thavesufficientincometomakethepayments.Ithrewtheletterinthetrashwonderingaboutthebankermentality—themoreyouneededmoneythe less theywere inclined to loan it toyou. It didn’t seem fair thatmoney isalwaysmoreavailabletothosewhodon’tseemtoneedmoney.

ThenIopenedtheletterfromthevehicleleasingcompanyannouncingtheleaseonmycarwasfinished.Iwassup-posedtoturnitintotheleasingdealeralongwithacheckfor$1,867tocoverthehigh-mileagepenalty.Thismademe

mad.My lease paymentswere higher thanmonthly purchase paymentswouldhavebeen,andnowIowedalmost$2,000extra.HowwouldIeverfindenoughmoneyforadownpaymentonanewcar?Iwastrapped.

In the pile of bills, I found a glimmer of hope. Through a cellophanewindowonthefrontofoneoftheenvelopes,Icouldseemynameandaddressprintedonacheck.Irippeditopen.

Itwasacheckfor$1,500.Whowouldbesendingmethatkindofmoney?A car dealer. The letter said I could use the check as part of the down

paymentonanewvehicle.Ofcourse,inordertovalidateit,Ihadtoshowittothe salesmanager before I started dealing on the newcar. I knew their game.Raisetheprice$1,500,thensendout$1,500checkstoallthesuckerslikeme.Ithrewthecheckinthetrash.

I paid all the utility bills, but I didn’t have enough to make the housepayment.Ihadinitiatedanoverdrawfeatureonmycheckingaccountsixmonthsearliersothebankwouldautomaticallycoveroverdrafts,butIwasalreadyoverthe $2,000 limit, was paying 18% on the balance, and would have to startmakingpaymentsonthatnextmonth.Ihadusedthelastoftheoverdrawcredittomakethehousepaymentthemonthbefore,soIcouldn’tusetheoverdrafttomakethecurrenthousepayment.

Igotupfromthedeskandtiptoedintothebedroomwheremywife,Judy,wassleeping.Without turningon the light, I fishedaround inherpurseuntil Ifoundhercheckbook,thenIreturnedtomydeskhopingshemighthaveenoughbalancetocoverthehousepayment.

Iwasn’tsurprisedtofindnobalanceatall.Likeme,shejustwrotechecks,hopingshedidn’toverdrawtheaccount.Ihadnowayofknowinghowmuchshehad.Shesoldrealestate,andthespringmonthshadbeenslow.Ithadbeenmorethanthirtydayssinceherlastcommission,soIguessedheraccountwasemptytoo.

Tuckedbehind the lastcheckwasapieceofwhitepaper, foldedup tight.Mymotivationwasn’tsomuchcuriosityastheneedtodosomething,anything,

inanefforttocontrolmygrowingnightmare.Thepaperwasareceiptfromoneofthoseexpensiveboutiqueshopswhere

rich women like to browse. The purchased item listed on the receipt was anartificialChristmastree.

HowwellIrememberedthattree,andthetraumaithadbroughtintomylifeatChristmastime.Atfirst,Judyhadbroughthomealivetree.Aftertwonightsofunsuccessful attempts to get me to string the lights on it, she expressed herfrustrationbygoingtotheboutiqueandcharging$200onherVISAcardtobuythat artificial tree with the lights already in place. I was furious, but the treestayed.

NowasI lookedat thereceipt,IrealizedJudyhaddeceivedme.Yes,shehadcharged$200on theVISA.Shehadalsogiven thestoreacheckfor$200andanother$200incash.Shehadpaid$600forthetree!Andshehaddisguisedthe price by splitting up the payment. She normally didn’t do things like this.Apparently,puttinglightsonthetreehadbeenalotmoreimportanttoherthanIhadsupposed.Ihadbeeninsensitivetoherneedsanddeservedthepunishmentshe had dished out—a $600Christmas tree. It seemed I hadn’t done anythingrightlately.

Iheadedintothegaragetogetthedouble-edgedlumberaxe.Itwasinthecornerwiththegardentools.Withoutput-tingonthesafetygoggles,Iturnedonthegrinderandsharpenedbothedges.Boy,wasJudygoingtobesorry.

The artificial tree was in one of the plywood cabinets in the garage. Idraggeditontothefrontlawnandchoppeditintolittlepieces.Whentherewasnothingbiggerthansixinches,Iburiedtheaxeintothelittlesycamoretreewehadbeennursingalong.Then Idecided to takeawalkbefore Ididsomethingreallydangerous.

My headwas a little calmer now. Swinging the big axe had helped, butnoneofmyfinancialproblemshadgoneaway.Ineededtofindsomemoney,ormylifewouldbeinshambles.

IrememberedthinkingwhenIhadgraduatedfromcollege,Iwouldhavea

great life if Iworkedhardand increasedmyearnings toabout$50,000ayear.Thatwasmydream,andIhadachievedit.Withcommissionsandbonuses,myincome ranged from$48,000 to$55,000ayear,yet I couldn’t afford tobuyawreathformyownfuneral.Iwaswastinga$600Christmastreeinthemiddleofthe night because I couldn’t paymy bills andwasmoremiserable than I hadbeeninmyentire life.Whatwaswrong?WherecouldI find themoneytogetoutofthisterriblepredicament?

Itoccurredtometogobacktothehouse,jerktheaxeoutofthetree,pullonaskimaskandseehowmuchmoneyIcouldextortfromthelocal7-Elevenstore.Dumbidea!

Itwas longpastmidnight, andonlyoneotherhouse in theneighborhoodhadlightson.

AsIwalkedupMapleStreet,Icouldseeanelderlywomanthroughoneofthe frontwindows.Shewassitting inanoverstuffedchair, readingsomething.Thenameon themailboxwasM.Sessions.Her firstnamewasMary. Ididn’tknowherwell, only that shehada full-timegardener.Shedrovea late-modelMercedes,andsometimeschauffeurspickedherup.Shelivedaloneinahousethatwouldappraiseformorethanhalfamilliondollars.Iguessedshewasinherlatesixtiesorearlyseventies.Inmyoccasionalconversationswithher,shehadseemedfriendlyandarticulate.

ThethoughtoccurredtomethatmaybeMrs.Sessionswouldloanmesomemoney.IwishedIhadshoveledsnowoffherwalkorinvitedheroverfordinner,buttherewasnotimetobutterherup.Ineededmoneynow.Musteringcourage,Itiptoedontotheporchandknockedonthedoor.

Nice to know I’m not the only one who can’t sleep,” she said brightly,recognizingmeassheopenedthedoor.

TherewasanelegantqualityaboutMarySessions.Eventhoughherneatly-cropped hair was gray, there was a vibrant, healthy look about her. Her eyeswere thecolorofNavajo turquoise,andhadan intense,piercingquality rarelyseen.Shehadfewerwrinklesthanwomenhalfherage,eveninthemiddleofthe

nightwithnomakeup.Iaskedherifshehadapaddedcellinherhouse.Whatintheworldfor?”sheasked,laughing.Iwaspleasedthatshefound

mycommentfunny.Quickly,inmymind,Icondensedmyfinancialpredicamentandblurteditout,endingwith,“IfIdon’tfindsomemoneyfast,IthinkImightjustturnmyselfovertothelocaljailer,becausethat’swherethey’llbeputtingmeifIcan’tpaymybills.”

TherewasalightheartedtoneinmyvoiceasImadethislaststatement.Ididn’twanthertothinkIwasreallyserious,butdeepdowninmyheart,Iwasn’tsureifIwouldn’tlandinjail.

Youareaskingmeforaloan?”sheasked.“Yes,Ithinkmoneywouldbebetterthanjail.”Ihaveneverloanedmoneytoaneighborbefore,”shesaid,hesitating.“But

Isupposethere’safirsttimeforevery-thing.Wouldyouliketocomein?”Pushingthedoorallthewayopen,shesteppedback,allowingmetoenter.

Mr.Smith,howmuchdoyouneed?”sheasked.PleasecallmePaul.Ithinktenthousandwouldstopthebleeding,”Isaid,

suddenlywishingIhadn’tsaidit,feelingashamedatmyaudacityfordroppingsucharequestatoneinthemorningona70-year-oldwomanIhardlyknew.

Shebegantolaugh.“What’swrong?”Iasked.Nothing,”shesaid.“I’mjustrelieved.Aneighborshowsupinthemiddle

ofthenightaskingforapaddedcellormoney,soInaturallyassumeheneedssomerealmoney,notjustpocketchange.GladIwaswrong.”

Whowasthiswomanwhothoughttenthousanddollarswaspocketchange?Twentythousandwouldstopthebleedingandputanicedressingonthe

wound,”Isaid,suddenlyfeelinggreedyenoughtodoublemyrequest.Firstyouaskforten,thenfortwenty.Soundslikeyoureallydon’tknow

howmuchyouneed,”shesaid.“Nowonderthebankwouldn’tgiveyoumoney.”

IhadthesickfeelingIhadjustblownawonderfulopportunity.Ishouldnothavebeengreedy.

Howdidyouknowthebankwouldn’tgivememoney?”Iasked,suspectingthatperhapssheownedthebank.

“Justahunch,”shewinked.“Wouldyouliketoplaysomechesswhileweworkthisout?”

Myideaoffundidnotincludeplayingchessinthemiddleofthenightwithawomanoldenoughtobemymother.Butifalittlechesswouldgetmealoan,whynot?

Sure,”Isaid,withpretendedenthusiasm.Weseatedour-selvesonsofasatoppositeendsofacoffeetable.Theplayingboardandpieceswerealreadyinplace.Idecidedtoletherwin,thinkingthatmightimprovemychancesofgettingthemoney.Wehadn’tbeenplayingverylongwhenshewentovertoadesk,shuffled

throughoneofthedrawers,thenreturnedwithalittlebookinherhand.Itwasapassbookforasavingsaccount.“Mostofmymoneyisinstocks,bonds,andrealestate,”sheexplained,“butI

keepalittlebitinasavingsaccountforemergencies.”Shetossedthepassbookonthetableinfrontofme,noddingformetolookinside.Ididso,carefullymemorizingthebalance:$147,952.34.“Isupposeyourcomingherecouldbeconsideredanemergency,”sheoffered.Itisforme,”Isaid,verysincerely,stillholdingontothepassbook,hardly

daringtohopethatMarySessionsmightactuallygivememoney.Aswecontinuedthegameofchess,IrealizedIdidn’thavetoletherwin.She

wasgoingtowinwhetherIwantedtoletherornot.Look,”shesaidthoughtfully,whenwewerealmostfinished,“Idon’tlike

throwinggoodmoneyafterbad.”Myhopessankintothebottomofmyshoes.Shewasn’tgoingtogivemethe

moneyafterall.“IwouldfeelalotbetteraboutloaningyoumoneyifIthoughtitwoulddo

somegood,”shecountered.Oh,itwill,”Iassuredher.“I’llmakemyhousepaymentbuyhamburgerand

potatoesforthechildrentoeat.Noneofitwillbespentfrivolously.”“YouprobablythinkI’masillyoldwidowwithmoremoneythansense,”she

said.“Ohno,”Ilied,wonderinghowshecouldreadmymind.“Wewereamonth

behindontherentwhenmyhusbanddied,”shesaid,suddenlychangingthedirectionofourconversation.Sheleanedback,forgettingthechessgame.“I’msorry.”Idon’tneedyoursympathy,notanymore.Ihadthreesmallchildren,no

insurance,nosavings,andnomarketableskills.Doyouhaveanyideawhatitislikegettingfoodforyourchildreninthetrashbinsbehindgrocerystores?Whentheclerkscaughtme,ItoldthemIwaslookingforproduceformypetpig.”Icouldn’tbelievewhatIwashearing.Itriedhardtopicturethiselegant

womanforagingthroughtrashbinsinsearchoffoodscrapsforherbabies.Icouldn’timagine.But,whataboutallthis?”Iasked,pointingtotheexpensivesurroundingsand

thepassbook.“Howdidyougetfromtheretohere?Anddon’ttellmeyouworkedreallyhard.Iknowalotofpeoplewhoworkhardandneveraccomplishanythinglikethis.I’moneofthem.”Ididn’tstartoutwithajoblikeyouhave,”shesaid.“Youhavenoideahow

blessedyouare.Therearealotofpeoplewhowoulddoanythingforthechancetodrivearoundinanewcar,callingonfurniturestores.”“Ifmyjobissowonderful,whyamIsomiserableandsobroke?”“It’sonethingtoworkhard,andquiteanothertoworksmart.Doyoureally

wanttoknowhowIdidit,andhowyoucandoittoo?”“Ofcourse.”“Doyouthinkyoucantrustanoldwoman?”“Whatdoesthathavetodowithanything?”Iasked.“IfIamgoingtohelpyou,teachyou,andloanyoumoney,Ihavetoknow

everythingaboutyourfinanciallife.Youwillhavetotrustme,likeyouwouldabankeraskingforfinancialinformation.Doyouthinkyoucandothat?”“Youwantfinancialstatements,balancesheets,stufflikethat?”Iasked.“Andmore.”“Likewhat?”Iasked.Shegotupandwentovertothedesk.Shereturnedwith

anothersavingspassbook,butwhenshehandedittome,Icouldseethisonewasblank.“Writeyournameonit,”shesaid.“AmIgoingtoopenasavingsaccount?”Iasked,hopingshehaddecidedto

makeadepositinmyname.“No,”shesaid.“Wecan’tdeterminehowmuchyouneeduntilweknowhow

muchyouhaveandhowyouarespendingit.Forthenextthirtydays,Iwantyoutotrackyourdailyexpensesandeveryotherfinancialtransactionbywritingthemdown.Ifyouspendseventy-fivecentsforaCoke,writeitdowninthisbook.IfyouchargegasonyourVISA,writeitdown.Ifyouwriteacheck,makeadepositorawithdrawalfromthemoneymachine,writeitdown.Iwanteveryfinancialtransactioninyourlifewrittendowninthislittlebook.”“You’reaskingalot,”Icomplained.“Twoorthreeminutesaday,atmost,”sheshotback.“Ifyouarenotwilling

todothat,thenleaverightnowandnevercomeback.”“I’lldoit,”Ipromised.“Checkmate,”shesaid,yawningwhilemakingherlastmove.Itwastimefor

metoleave.“Whataboutmyhouse?Ican’tmakethepayment.Yousaidyouwouldloan

memoney.Whataboutthat?”IrealizedIwasbeingpushy,butIwasdesperate.“Youwon’tloseyourhouseinthirtydays,”shesaid.“Itwilltakeatleastthat

longforyoutomasterthedisciplineoftrackingdailyexpenses.”“Thenyouwillloanmethemoney?”Iwasdeterminedtopinherdown,getan

answer,onewayortheother.AsIsaidearlier,”sheresponded,thoughtfully,“Idon’tlikethrowinggood

moneyaway.Untilyoulearnthelawsoffinancialsuccess,youfranklyareabadcreditrisk.”“Isupposetherearefiftylaws,”Isaid,startingtofeelthatIhadgottenmy

hopesupfornothing.Altogether,Isupposetherecouldbethatmany,perhapsmore.Butthereare

onlyfourmainlaws,”shesaid,beginningtorubherchinthoughtfully.Therewasalongsilenceaswelookedintoeachother’seyes.Ihadnoideawhatwasgoingoninherhead,onlythatsomethingseriouswashappening,anditwouldbebestformenottodisturbthesilence.I’lltellyouwhatI’lldo,”shesaid,finally,herwordsslowanddeliberate.

“Whenyouhavedemonstratedtomethatyouhavemasteredthefourlaws,I’llloanyouallthemoneyyouwant.”“Idon’tbelieveyou,”Isaid,emotioninmyvoice.IfeltlikeIwasgoingto

cry.Shehadnorighttotoywithmelikethis.“Youdon’ttrustme?”sheasked.“Getreal,”Isaid,startingtofeelangry.“Rememberthedayswhenyouwere

scrounginginthegarbagebins?Ifagroceryclerkhadofferedtogiveyouallthemoneyyouwanted,wouldyouhavebelievedhim?Orwouldyouhavelaughedathim?”“Iwouldhaveslappedhimforbeingsocruel,”shesaid.“NowyouknowhowIfeel.”Againtherewasalongpauseaswelookedinto

eachother’seyes.“I’llputitinwriting,”shesaid,turningandwalkingovertothedesk.AllI

wantedtodowasgohome,butIwaitedinsilenceasshescribbledsomethingonapieceofpaper.Whenshefinallyhandedmethepaper,IcouldhardlybelievewhatIwas

reading.

ToWhomItMayConcern:

Beingofsoundmind,I,MarySessions,doherebyagreetoloanmoneytomyneighbor,PaulSmith,

whenhehasdemonstratedtomysatisfactionthathehasmasteredthefourlawsoffinancialsuccess.Nocollateralwillberequiredforsaidloan.Theinterestratewillbe8%;thetermsofpaybackwillbenegotiatedatthetimetheloanismade,andtheamountshallnotexceed$2,000,000.

MarySessions

MarySessions

Iwasspeechless.CarefullyIfoldedupthepaperandplaceditinmypocket,alongwiththeblankpassbook.AsIwalkedhome,IhadthestrongestfeelingthatMarySessionswasgoingtochangemylife.Iwasdeterminedtodoallsheasked.IalsodecidedIneededtoimpressherbywinningthenextchessgame.

Thefinancialrecord-keepingfunctionsessentialtothesuccess

andsurvivalofanybusinessareequallybeneficialandnecessaryinthefinanciallivesofindividuals

andfamilies.—BlaineHarris

SchoolBegins

Afterafewdaysofrecordingeveryfinancialtransaction,IdroppedinonMaryoneeveningtoshowhermypass-bookandwhatIwasdoing.Shewasright.Ittookonlyafewminutesaday,butIdidn’tlikedoingsomethingthatsometimesseemedsotrivialandtedious.SheseemedpleasedthatIcametoseeher,andwantedtoplayanothergameofchess,butIsaidIdidn’thavetime.

“Butisn’titalittlesillyrecordingeverydonut,Coke,andquarterforthe

parkingmeter?”Iasked,attemptingtoexpressmyfrustration.Sheinvitedmetositdownbesideherononeofthesofas.Thoughtfully,she

rubbedsomeoftheagingspotsonherlefthand.“Tracking daily expenses is the first necessary step toward any kind of

financialsuccess,”shesaid.“Agoodbusinessrecordseveryfinancialtransactioninbasically the samewayyouaredoing it.Everypennycoming in andeverypenny going out is accounted for, in writing. From this raw data, the manyreportsformanagement,stockholders,andtaxcollectorsareassembled.

“IhadafriendwhowasanaccountantforFordMotorCompany.Hesaidthe companyhad topresent its financial information threedifferentways: oneformanagement,oneforstockholders,andonefortheIRS.Withouttherawdatafrom every financial transaction, and the resulting reports and documents, nobusinesscansurvive.

“Youhave to be able to count it ormeasure it if youwant tomanage it.Howcanyoutellifyouarewinningorlosingifyoudon’tkeepscore?Doesn’titmakesensethatthefinancialprinciplesabsolutelyessentialforthesuccessandsurvivalofanybusinessareofequalvalueinmanagingthefinancesofprivateindividualsandfamilies?”

“Yes,”Isaid,andstartedtogetup.Shemotionedformetostayput.“Yousee,businessesandwealthypeoplehireaccountantsandbookkeepers

totracktheirmoney.Poorpeopledon’t.That’soneofthereasonstheystaypoor.You thinkyouarenotwealthyenough tohireanaccountant,so Iamteachingyouhowtodoityourself.

“Thatwhichwefocusondailybecomeseasyorautomatic.It’snotthatthenature of the task becomes easier, but your ability to handle it increases. In atoughgamesituation,abasketballplayerwhowillspendafewhourseverydaypracticingshootingandfundamentalswillfindhimselfonautomaticpilot,sohedoesn’t have to think aboutwhat he is doing.He doesn’t have time to think.Finances are the same way. If you spend a little time every day doingfundamentalstuff,likerecordingexpenditures,you’llfindyourselfonautomatic

pilotandincontrolwhenthetoughproblemscomealong.Yourabilitytohandlebigfinancialproblemsincreasesasyouexpenddailyeffortonfundamentals.”

Asshetalked,IhadthefeelingthatshewastellingmethingsIalreadyknew—thingsburiedinsomedeep,forgottenplace.Herwordswerebringingtruthtothesurface.

“Overtheyears,I’velearnedtokeepmyweightdown,”shecontinued.“Itwasn’teasy,butoneofthestrangephenomenaofdietingisifyoucandisciplineyourself towrite downon a piece of paper the calorie count in every itemoffoodyoueat,andifyoudon’tdoanythingelse,youbeginto loseweight.Theprocess of counting calories alone will bring about weight loss. Isn’t thatinteresting?”

“Are you trying to tell me that merely writing down my financialtransactionswilleasemyfinancialproblems?”

“Absolutely.Youwillfindmoneythat’sbeenslippingthroughthecracks.Tracking helps you see the cracks so you can plug themup, so you can havemoremoneyfortheimportantthings.”

“Good,”Isaid,gettinguptoleave.“I’llkeeptracking.”Again,shemotionedformetositbackdown.“There’smore.”

“Thebestcomputerintheworldistheonebetweenyourears,”shebegan.“Everyone has a personal computer more powerful than anything at thePentagon,butmostpeopledon’tgive their internal computersa fair chance tohelpthem,especiallywhenitcomestofinances.”Shereachedforward,pickeduponeofthecastlesonthechessboard,andbeganplayingwithit.

“Thecomputerinyourheadcan’thelpwithyourfinancesifyoudon’tgiveit the raw data to work with. And you can’t second-guess your computer bygivingitlimitedinformation.Itdoesn’tplayitsbestgamewithapartialdeck.Ithascapabilitiesfarbeyondyourconsciousabilities.Don’tlimititseffectivenessbygiving it partial or limiteddata.Give it every- thing.Give it thedata fromeveryfinancialtransactioninyourlife,thenstandbackandletitgotoworkforyou. You will be amazed at how much better you will be at solving your

financialproblems.Gohomeandtrackeverything.Getyourwifeandchildrentodoittoo.”

“Fatchanceofthateverhappening,”Isaid.“TheyarealotworseatmanagingmoneythanIam.”

“Next timeyouand Judydiscuss thehousehold andgrocerybudget, giveheroneoftheselittlepassbooksandaskhertorecordhertransactions.Tellherinamonthyouwilladdupthetransactionstogetheranddecideifanythingneedstobechanged.

“Do the same thing with the children and their $30 allowances, but tellthemiftheycanonlyaccountforhalfofwhatyougivethem,whenallowancetime rolls around again, youwill give themonlyhalf asmuch.Theirmonthlyallowanceswillequal thetotalof thetransactionsintheirbooks,not toexceedthe$30receivedatthebeginningofthemonth.Betough,butnotmean.They’llcomearound.”

As I walked home that evening I was determined to become a trackingfanatic. Iwrote down everything for amonth. Judy and the children,with theexpected protest, wrote downmost things. I didn’t show them the $2millionpromissorynote.Thatwasmyprivatesecret,myprivatehope.

Ibegantomakesomeinterestingdiscoveries,likeJudyandmerunningupbetween$85and$100amonthinover-drawncheckcharges.Thatwasasstupidasusing$20billstotestpapershredders.Weputastoptoit.

I also discovered Judy and the childrenwere renting two or three videosthreeorfournightsaweek,costingusnearly$100amonth.Manyofthevideoswedidn’tevenwatch.Usingtheargumentthatthechildrenneededtobedoingbetterinschool,JudyandIsettherulethatvideoscouldbecheckedoutonlyonFridayorSaturdaynight,unlessspecialcircumstancesapprovedbyJudyandmedictatedotherwise.Thissavedanother$75.By theendof themonth, Ihadanextra$300andwasabletopayallthebills,butIwasstillamonthbehindonthehousepayment.

Ifyoucan’tmeasureit,youcan’tmanageit.—GeorgeOdiorne

TheFirstLaw

NotonlydidIbecomeaddictedtotracking,recordinginthelittlepassbookeverypennythatpassedinandoutofmypossession,butweallagreedthatJudyandthechildrenshouldkeepdoingittoosothatwewouldhaveatruepictureofwhatwashappeninginourhousehold.Sinceagoodportionofmyincomepassedthroughtheirhands,itwasessentialforthemtobeinvolved.Ofcourse,theywerenotasexcitedabouttheprocessasIwas,andtheycouldn’tunderstandwhyIwassuddenlysodeterminedtotrackeverypennyinourhousehold.Theystilldidn’tknowaboutthe$2millioncarrotMarySessionswasdanglinginfrontofmynose.Ididn’twanttousethattobringthemaround.Iwouldtellthemlater.Itwouldbeawonderfulsurprise.

TheideathatfascinatedmewasMary’sclaimthattheprocessoftracking,by itself,would improveour financial situation—like counting calorieshelpedkeepherweightdown.

Onenight,whilebrowsingthroughmylibrary,IfoundaneattrackingstoryinabooktitledTheGameofWork,byChuckCoonradt,inwhichLeeNelsonrelatedhowthistrackinghelpedhiminateenageworkexperience.ThefollowingisthestoryinLee’sownwords.

Myfirstrealcontactwith(tracking)…occurredoneafternoonduringmyfirstafter-schooljobasabagboyataSafewaygrocerystoreinWalnutCreek,California,earning$1.33anhour.Itwasprobablythefirstorseconddayofmyemploymentwhentheassistantmanagertookmeintothebackroomandshowedmethree4′x8′plywoodbinsfilledtooverflowing

withemptypopbottles.

Theassistantmanagerexplainedthatthebottlesneededtobesortedbykindintocasesbeforetheycouldbepickedupbythevariousvendors.Heexplainedwhythereweresomanybottlesinthebins,thattheadultclerkshatedto“workbottles,”andavoidedthetaskwheneverpossible.ThatwaswhyIwasbeinggiventhejob—asa16-year-oldkid,Iwasatthebottomofthepeckingorder.

Themanagerintroducedmetothecornerofthebackroomdesignatedforsortingbottles.Heshowedmewheretheemptycaseswerestored;whichbottlescouldbecombinedinthesamecases,whichhadtobekeptseparate;andwherethecasesofemp-tiesneededtobestacked.JustwhenIthoughtIknewalltherewastoknowaboutthenewtaskandwasreadytogotowork,themanagersaid,“Ittakesmostclerksonehourtodoabin.Ihopeyoucandothatwell.”

Helookedathiswatch.Ilookedatmine.

“Letmeknowwhenyou’vefinishedthefirstbin,”hesaid,thenadded,“Someofthebottleshaveleftoverpop;helpyourself.”Hesmiledathissickattemptathumor,thenturnedandwalkedaway.

Suddenly,myworkhadmeaning.Workingthebottleswasnotjustanotherjobthatneededtobedone.Astandardhadbeensetbywhichmyperformancewouldbemeasured.Myprogresswasbeingtracked.Themanagerwaskeepingscoreonmyefforts.Iwaskeepingscoretoo.Mypalmsbegantosweat.Ilookedatthebinsofbottleswithnewinterest.

Comparingworkingbottleswithmyfavoritesport,basketball,themanagerhadputmeintoarealgamesituationandturnedonthescoreboard.Incorporateterminology,hehadorderedtheaccountantsto

trackandreporttheprogressinmydepartment.Iflewatthebottles.

Anhourandtenminuteslater,Ifinishedthefirstbin,frustratedwithmyclumsiness,butconfidentthatifIpersisted,Icouldbeatthemagic60-minutebarrier—theacceptedstandardinmynewworkingworld.

Ibecamethedesignatedbottleworkerinthatstore,delightingtheclerkswhohatedthiswork.Arecordwaskeptonhowlongittookmetoworkeachbinofbottles.Afteraboutamonth,Iworkedthreeoverflowingbinsofbottlesinonehour—threetimestheacceptableratesetbytheclerks.Themanagerwaspleased;theotherworkerstalkedaboutit.

IbelievedIwaspossiblythefastestbottleworkerintheentireSafewaychain.IfeltlikeIhadaccomplishedsomethingsignificant.Maybetheotherworkersknewmorethanmeaboutchecking,cuttingmeat,ortrimminglettuce—butIknewmoreaboutworkingbottlesandcoulddomyjobatleasttwiceasfastasanyoneelseinthestore.Becausemyperformancehadbeenmeasuredandreportedback,ithadimprovedbeyondanyone’sexpectations.

Themanagerofthenightstockingcrewheardaboutthekidwiththefasthandsandarrangedformetobepromotedtothepositionofnightstockclerkassoonasschoolwasout.Thenightcrewworkedfrom11p.m.until8a.m.,andmyhourlywagewasincreasedto$2.42perhour.

Thenightmanagerhadacompetitivepersonality,onandoffthejob.Everytaskwasaracetoseewhowasbestandfast-est.Attheendofanight’swork,atypicalcommentwas,“Bigloadcomingintoday.Betterwearyourrunnin’shoestonight.”

WhenIarrivedtobeginwork,hewouldsayhowmanycasesarrivedonthetruckthatafternoon.“Only721casestoday.Oughttobethrough

about4:30.”Thenwe’dgotowork.

Myeyescouldn’tkeepupwithhispricemarkerasitflewoverthecans.Hecouldthrowsixsoupcansatatimeontotheshelf,threeineachhand,thelabelsallfacingforwardwhenthecanscametorestinperfectrows.Asmuchashelovedspeed,heneversacrificedquality.OnTuesdaynight,whenwewashedandwaxedthefloors,hismopcouldperformmoretricksthanawitch’sbroom.

HehadlearnedthatintheNavy.

Thenightmanagerchallengedmetotrytokeepupwithhim,animpossibletaskatfirst.ButItriedveryhard,andeveryweekgotalittlecloser.Itseemedeverytaskwastimedandmea-sured,eventhetearingupofboxesfortheincinerator.Speedandaccuracywerethegame,andwekeptscore.Itmadetheworkfun,likesports.Ilikedtogotowork.

Someofthenight-crewworkersdidn’tliketocompetewiththemanagerandme.Theythoughtweweretoo“gungho.”Theyseemedtopreferwatchingtheclockinsteadofbeatingit.

Itfeltgoodtowalkoutsideafteranight’swork,mybodywindingdownafterrunningtokeepupwithorbeatthemanager,thenhearhimthrowdownthechallengetocomebackthatnightwithmyrunningshoes.Hiswordsweremusictomyears.Ifeltlikeanathletegettingreadyforthebiggame.

SometimesIthinkbackonthatfirstexperiencewiththebottles,andwonderhowthingsmighthaveturnedoutifthemanagerhadmerelytoldmetogointhebackroomandworkbottlesuntilquittingtimeandhadnottrackedmyprogress.

Lee’sstorysupportstheuniversaltruththatwhenperformanceismeasured,performance improves because you receive comparative feedback. GeorgeOdiornesaid,“Ifyoucan’tmeasureit,youcan’tmanageit.”

OneWednesdaynight,Judyannouncedthatbecauseofsomevolunteerworkshehadbeeninvolvedin,shehadreceivedfourticketstoafigure-skatingcompetitioninthecityontheupcomingSaturdaynight.

“Whatastrangecoincidence,”Isaid,explainingthatatworkthatafternoon,mycompanyhadgivenfouricehockeyticketstoeachsalesrepwhoreachedhisquotathepreviousmonth.ThehockeygamewasSaturdaynighttoo,anditwasjustafewblocksfromthefigure-skatingcompetition.

MysonBillyandIwantedtogotothehockeygame.Judyandourdaughterwantedtogotothefigure-skatingcompetition.

“Ican’tunderstandwhyanyonewouldratherwatchabunchofguysfightingontheiceoverthebeautyandgraceoffigureskating,”Judyargued.

“Hockeyplayersarebetterathletes,”Billyprotested.“Theyskatecirclesaroundthoseguysintights.”

“Theycannot,”Lisashotback.Andsothediscussionbegan,lastinganhourormore.I’mnotsurewhowon.Itjustseemedrefreshingtoseethefamilydoingsomethinglikethisinsteadofwatchingtelevision.Theendresultwasthatwedecidedtogotobothevents—thefirstpartofthefigureskatingandthesecondhalfofthehockeygame.

IenjoyedthefigureskatingmorethanIthoughtIwould.EvenBillyofferedpoliteapplausewitheveryoneelsewheneachskater,orpairofskaters,finishedandwhenthejudgesheldupthecardswiththeindividualscoresrangingfromabout4.5to6.5.Theskaterspolitelyacceptedthejudges’evaluations,whethertheywerehappyaboutthescoresornot.

Atonepoint,apretty16-year-oldgirlfelldownduringthelastpartofherroutine.Shestartedtocry.Therewereoohsandahsintheaudienceaspeoplefeltsorryforthepoorgirl.Afterherperformance,whenoneofthejudges,abaldmaninawhiteturtlenecksweater,heldupascorecardwith4.5writtenonit,

Billywastheonlyonewhobooed.Thehockeygamewasdifferent.Thefirsttimeaplayerfellhardontheice,

thecrowdhardlynoticed,exceptforBillywhomadeafewoohsandahs,imitatingthefigure-skatingcrowd.Thenhebroughtourattentiontothefactthattheplayerontheicehadnotbeguntocry.

“Ohshutup,”Lisasaid.Billynoticedotherdifferences,likewhenanofficialmadeaparticularly

questionablecall,theplayerscomplainedandthefansbooed.Somethrewcupsofbeerattheofficial.

“WishIhadsomethingtothrowatthatbald-headedguyinthewhiteturtleneck,”Billysaid.

Later,oneoftheplayerswasputinthepenaltyboxfortrippingupthebeer-soakedofficial.Thereweretwoorthreegoodfightsduringthematch,andwheneverthehometeamscored,thefanswentwild.Theplayersskatedhard,andthefanswereloudduringthefinalperiod,withthehometeambehindbyasinglegoal.

Onthewayhomewehadalivelydiscussionoverthedifferencesinthetwoice-skatingcompetitionswehadwitnessed.Botheventsinvolvedskilledathleteswhohadspentmanyyearspreparingtoperform.

Isuggestedthatperhapsthereasonthefigure-skatingcrowdandperformersweresopolitewasthefactthatnobodyknewthescoreuntiltheperformancewasover,anditwastoolatetodoanythingaboutit.Ipointedoutthatthereasonthefinalperiodofthehockeymatchwassowildwasbecausethehometeamwasonegoalbehind.Theplayerswereskatinghardertocatchup,andthefanswerecheeringthemon.Ispeculatedthatifafigureskaterknewshewashalfapointdownwhileshewasperforming,shewouldskateharderinanefforttocatchup.

Thefansatafigure-skatingeventdon’tknowwhatishappeningeither.Theydon’tknowifaparticularskaterisfallingbehind,catchingup,ornotevenintherunning—sotheapplauseispolite.Whenthejudgesfinallyholduptheir

scorecards,theperformanceisover,anditistoolatetodoanything.“Withcomputertechnologythewayitis,”Billysuggested,“theyoughtto

developasystemwhereeachjudgehasanelectronicscoreboardabovehishead,andadialwith1–10numbering,sowhichevernumberthejudgeturnsto,thatisthenumberonthescoreboard.Alltheboardsread5whentheperformancebegins,andthejudgeswouldturntheirdialsupordownastheperformancedevelops.Thefansandskaterswouldthenknowthescoreduringtheperformanceandcouldreactaccordingly.Thefans,beingabletoseethechangingnumbers,wouldknowwhetherornottocheerorboo.Theskaterwouldbecomemoreaggressiveinanefforttocatchup,ormoreconservativeinanefforttoprotectacomfortablelead.”

Lisapointedoutthatthegirlcriedwhenshefelldown,notbecauseshewasagirlandthefallhurt,butbecausesheknewthejudgeswereloweringherscore.“Hockeyplayerswouldcrytoo,”sheadded,“iftheofficialstookapointoffthescoreboardeverytimeoneofthemfelldown.”

“Theywouldnot,”Billyargued.Suddenly,Isawanopportunitytotieallofthisinwithourfamilyfinances.

“Thebigdifferencebetweenfigureskatingandicehockeyisthescorekeeping,”Isaid.“Infigureskating,nobodyknowsthescoreuntiltheperformanceisover,sothecrowdispolite,andtheperformeriscareful.Whenthejudgesfinallyholduptheircards,theresultsaresosubjective,thehighandlowscoresarethrownout.It’sabadsystem,butIguessit’sallwehaveuntilsomeonelikeBillycomesupwithsomethingbetter.”

“Ontheotherhand,”Icontinued,“inicehockeythefans,theplayers,andtheofficialsknowthescoreatalltimes.Theofficialcan’tchangethescoreifaplayerhitshimwithastickorifafanthrowsacupofbeerathim.Theplaychangesasateamaggressivelytriestocatchuporbecomesmoredefensiveinprotectingalead.”

“It’smorefunwheneverybodyknowsthescore,”Billyadded.“Exactly,” I said. “That’swhy Ihavebeen trying toget all ofus tokeep

scorewithourfamilyfinances.It’snotfuntolose.EverymonthwhenIsitdowntopay thebillsanddon’thaveenoughmoney topay themall, I realizewe’velostagain.”

ItoldthemwhatMaryhadpromised,thatifwewouldkeepscoreonadailybasisbytrackingallofourfinancialtrans-actions,wewouldstartwinningthemoney game. I said I was determined to do that, and needed their help andcooperation.

LisaaskedifwecouldstillaffordthevacationtoYellowstonewehadbeentalkingabout.Isaidwewouldstillgoonthevacationifwecouldpayforitwithcash.Iwouldnotchargeavacationona20%VISAcard.Furthermore,thefirst10% of every paycheckwas already committed to paying ourselves first, andthatmoneyatthepresenttimewascommittedtogettingridofourdebts.Ifwecouldfindthevacationmoneyintheremaining90%ofmyincomeallocatedtolivingexpenses,thenwecouldstilldothevacation.Judysuggestedwesetupaspecialsavingsaccountforvacations.Iagreedtodoit.

I reminded them that aswe persisted in tracking all of our expenses,wewould discover expenses that were not as important as our family vacation.Theseexpensescouldbeeliminatedor reduced,and that’showwewouldfindthemoneyweneeded.Buteveryonehadtohelp.

As a parent, you alwayswonder if serious discussions like these sink in.But in the comingweeks, I realizedan impacthadbeenmade.Billybought anew pair of basketball shoes at Payless for about half the price we hadpreviouslypaidfor thename-brandshoes.He insistedweput thedifference inourvacationaccount.Atpromtime,Lisaborrowedadressinsteadofbuyinganew one, on the condition we would put the dress money into the vacationaccount. As the end of school approached, we realized that even though thevacation might not happen until August, it was indeed going to take placewithoutgoingfurtherintodebt.

Billy and I found ourselves in an ongoing discussion about tracking andscorekeepinginsports.Wenoticedthescoreisalmostalwaysthefirstthingthe

newsreportsaboutanysportingevent.Everybodywantstoknowwhowon,byhow much, and which players scored the most points. Every sport hasscorecards,scoreboards,andstatsheets.

In sports, especially professional sports, measurements are continuallyaddedtoincreaseplayerperformanceandfaninterestinthegame.Baseballhaswhat theycall the“sluggingpercentage”inadditionto thebattingaverageandruns batted in. In golf, they have driving-accuracy measurements, puttingpercentages,numberofgreenshit,andputtsperround.Somebasketballcoachesaremonitoringpointsperpossessioninanefforttomeasuretheeffectivenessofboth offensive and defensive strategies. Good coaches understand that whenperformanceismeasured,performanceimproves.

We discussed how these principles apply to money. If you measure andtrackeverydollar—ifyoukeepscore—youwillplaythegamebetterandyourwin/losspercentagewillgoup.

OnedayItriedtoexplainallofthistoaco-worker.Hedecidedtogohomeandlookoverhisbankstatementanddis-coveredthehealthinsurancepackagehe had canceled more than a year earlier was still activating the automaticmonthlywithdrawal.He thoughthehad canceled thepolicywith aphone callwhenhehadstartedanotherpolicy.Foroverayear,hehadbeenpayingonbothpolicies,wastingorthrowingawayover$2,000induplicateinsurancefees.Thefirstcompanywouldn’trefundthemoneybecausetheyhadnowrittenrecordofacancellation.Hadhebeentrackinghisexpensesonaregularbasis,thiswouldnothavehappened.

Intime,Irealizedgoodthingswerehappeninginmyfamily.Thechildren,especially,werelearningtomanagemoney,somethingtheydidn’tseemtolearninschool.

Youcanaskanyonewhichismostimportant—theirfamily,ortheirjoborbusiness—andtheywilllookatyoufunnyasifwonderingwhyyouwouldaskaquestionwheretheanswerissoobvious.Ofcourse,thefamilyismoreimportantthanthejoborbusiness.

Ifthefamilyismoreimportant,thenwhydon’twemanagefamilyfinanceswith the same care, detail, and professionalism used in managing businessfinances?Ifbusinessesrantheirfinancesthewaymostfamiliesdo,thebusinessfailureratewouldskyrocket.

Whatmostofusdon’tseemtounderstandisthatprogressinourfinanciallives, not just sports andbusiness, is directly related to the ability tomeasure.Four hundred years ago, themost portablemechanical timepiecewas awaterclockonawagon.Itwas10feethigh,weighed300pounds,andyouhadtopullitaroundwithahorse.Anditdidn’tkeepgoodtimeifthewatersloppedaround.The smallest unit of lengthmeasurementwas the distance fromKingHenry’sthumbtohisnose,ayard.Everythingtheybuiltwasdesignedaroundthatunitofmeasurement.

Todaywearemuchbetteratmeasuringthings.Wehavememorychipsandintegratedcircuits.Ourabilitytomeasureandkeeptrackofnumbersisgrowingfaster than anyone ever guessed. In themid-1980s,Microsoft chiefBillGatessaid,“640Koughttobeenoughforanyone.”Bythemid’90s,640Kcomputersweremoreobsoletethanmanualtypewriters.

Thankstocomputers,almostanyoneonadailybasiscanknowhowmuchinteresttheyarepayingorearningandexactlyhowmuchmoneytheystilloweon debts. It is even possible for private individuals with modest incomes toreceive timely printed reports eachmonth giving the exact status of financialgoals, a dollar-by-dollar account of spending for themonth, and a customizedDebt Eliminator program. Anyone can have a personal accounting andscorekeepingsystem.

One of the greatest rituals occurs at lunchwhen three or four friends gettogethertoeatandenjoyeachother’scompany.

“Howarethingsgoing?”someoneasks.“Great,exceptIhavealittlebitofacash-flowproblem.Surehopeoneof

youpicksupthetabtoday.”Everyonenodswithsolemnunderstanding.“Boy,wesureknowwhatthat’s

like.Whyisitthateverybodyseemstohaveacashflowproblem?”Whatarethesepeopletalkingabout?Cashdoesn’tflow,notlikewater.Or

does it?Water is a powerful resource.When left unrestrained, its flowcanbeverydestructive.

Money is alsoapowerful resourceand, likewater,whenallowed to flowunrestrained,canbeverydestructivetohouseholdsandfamilies.

Ifyouhavealeakyfaucetsysteminyourkitchensink,beforeyouknowitthe small amountofwater thatdripsoutonacontinualbasis soonhaswastedlargequantitiesofwater—andyouweren’tevenawareof it.Likewise, ifyouhavea leaky financial system inyourhousehold,great sumsofmoneywillbewastedandlostbeforeyouknowit.

Moneythatisallowedtoleakoutonacontinualbasiswithhardlyasecondthoughtjeopardizesthethingsinlifethatareofthegreatestvaluetoyou.Aleakyfinancial system that allows cash to either drip, drizzle, or flow out untamed,sacrificeswhatyouwantmost in life for the thingsyouwantrightnow.Thesekindsofsacrificesrobindividualsandfamiliesofthefreedomandpeaceofmindthat comes from directing money toward its greatest and most powerful useratherthanbeingfrivolouslywastedthroughinstantgratificationspending.

Tracking enables us to identify the leaks or flow ofwhere ourmoney isgoingandredirectit toamuchgreaterpurpose.It’sasimpleprinciple,sowhydon’tthemajorityofpeopledoit?Thereareadozenexcuses—

“I’m too busy.” “I don’t want to know.” “It’s not impor- tant.” “I don’thavetime.”

Andthe listofexcusesgoeson.Nowis the timeto letgoof theexcuses.Therealityisthosewhoaccumulatewealth,notjustearnalotofmoney,committoknowingwhatisgoingonintheirfinanciallivesandtrackthepatternsintheirspendinghabits.Thetrackingprocesstakesonlyacoupleofminutesaday,yetfreesupatremendousamountoftimefromworryinganddealingwithfinancialchaos.

Wise people look past the excuses and find the exact places where their

cashflewwhentheythoughtitwasgoingtoflow.Theybacktrackalongthecashpipelinelookingfortheleaks,knowingthatiftheycanfindtheleaks,theycanfixthem.

You’vegottomeasureitbeforeyoucanmanageit.Likeinthebottlestoryat the beginning of this chapter, when performance is measured, it improves.Whenit ismeasuredandreportedback, therateof improvementaccelerates,aprincipleexplainedbyThomasMonsoninabookmanyyearsago.

Tracking—thefirstlawoffinancialprosperity.

Personalgoalsettingisthestrongestforceintheworld.—PaulJ.Meyer

TheSecondLaw

Proudly,ImademyreporttoMary.Aswebeganoursecondgameofchess,ItoldherabouttheregisteredletterfromtheIRSatthepostoffice,andhowIwasworriedaboutbeingauditedandhavingmypersonalbusinessdeductionsdisallowedbecauseIdidn’thavereceipts.

“Nextyearyouwon’thavetoworryaboutthat,”shesaid.“You’llhaveallyourtransactionsrecordedintheselittlebooks.”

“ButwhatdoIdonow?”Iasked.“Openit.Itmaynotbeasbadasyouthink.”Shebegantolaugh.“What’ssofunny?”Iasked.“ThatyouaresoafraidoftheIRS.”“Ifyouwereinmyshoes,youwouldbeafraidtoo.”“NoIwouldn’t.”“Why?”“IusedtobeanIRSauditor.”

“Really?”Iasked,reachingforthepassbook,thinkingIhadbetterbemovingalong.Suddenly,IfeltveryuncomfortableknowingIhadbeenspillingoutthesecretsofmyfinancialtroublestoanIRSagent.

“ThosenightsIwasfishingthroughthedumpsters,Iwasstudyingaccounting,”sheexplained.“WhenIgotmydegree,theIRSgavemeajob.Ibecameanauditor.”

“PeopleworkingfortheIRSdon’tmakeenoughmoneytolivelikethis,”Ichallenged.“Theycertainlydon’tmakeenoughtomake$2millionunsecuredloanstoneighbors.”

“Theydoiftheyusetheirmoneywisely,”sheargued.“Whatisthatsupposedtomean?”“Myjobwastoreviewtaxreturns.Isawthereturnsoftherichandthe

poor.Isawteachersearninglessthan$25,000ayearwhowerefinanciallyindependent.Isawdoctorsearning$250,000ayearwhowereattheedgeofbankruptcy.Iwasalwaysamazedathowonepersonearning$50,000ayearcouldlivesomuchbetterthananotherearningthesameamount.Studyingthousandsofreturnseveryyear,Ilearnedsomevalu-ablelessons.

“Whileauditingtherecordsofverysuccessfulpeople,Imadesomegoodfriendsandlearnedsomevaluablelessons.Isawwheresmartpeopleputtheirmoneyandwhereotherpeoplesquanderedtheirs.

“Ibuilta$20millionnetworth,notfrommyIRSpaycheck,butfromwhatIdidwithmysavingsfromthosepaychecks.Butthat’senoughfortonight.Opentheregisteredletter.Itmaynotbeasbadasyouthink.

“Checkmate,”shesaid,winningoursecondgameofchess.Shewasright.TheletterinformedmethatIhadmadeanerrorandowedthemanadditional$431.Marytoldmetosendthem$75withanotesayingIwouldsendthemthatamounteverymonthuntilthedebtwaspaidinfull.

Aftertwomonthsoftrackingmyfinancialtransactions,IwentovertoMary’sforathirdgameofchess.ItoldherIhadcalledtheleasingcompanyandproposedIdrivemycarforanotheryeariftheywouldlowerthepayment

amountandapplythedifferencetowhatIowedthemforhighmileage.Theyacceptedmyoffer.

Itoldhertrackinghadhelpedalot,andIwaswillingtocontinuedoingit,butIstillhadtoomanymoneyproblems.ItoldherIwasreadytolearnthesecondlaw.

Shesaidthesecondlawwassettingtargetsorgoals.“Wehavealreadytalkedaboutthecomputerbetweenyourears,”Mary

began.“Throughyourtracking,youareputtingalotoffinancialinformationintoyourcomputerthatitdoesn’tknowhowtoprocessyet.Itdoesn’tknowwhattolookfor.Itdoesn’tknowtowhatendyouwantthisfinancialdatamanipulated.

“Youhavetogiveyourcomputertargetsorgoals.Thenitgoestoworkmanipulatingthedatayouinputtohelpyouachievethosegoals.”

“ThenIsetmygoaltohave$50millioninsixmonths,”Isaid.“Don’tmockme,”shesaidasweseatedourselvesonoppositesidesofthe

chessboard.“Thenmygoalistobeatyouatchess,”Isaid.“That’saboutaslikelyasfinding$50million,”shechallengedasshe

movedthefirstpawn.“Theyalwaystalkaboutgoalsettingatoursalesmeetings,”Iexplained.“I

guessIneverpaidmuchattentionorbelievedittobeanythingmorethanagimmickusedbymanagementtogetsalesmentoworkharderforlessmoney.Idon’thaveanyfinancialgoalsbeyondputtingouttoday’sfires.”

“Howmuchdoyoupayamonthininterestonallyourdebt?”sheasked,afterfourorfivemoves.“About$1,500amonth,”Isaid,withouthavingtothinkveryhard.The

trackinghadmadememuchmoreawareofwheremymoneywasgoing.“Howwouldyoulikeitifyouremployergaveyoua$1,200amonth,after-tax

raise?”sheasked.“Myfinancialworrieswouldbegone.Fatchancethatwouldeverhappen,”I

complained.“Thengiveittoyourself.Youdon’tevenhavetotellyouremployer.”“Idon’tunderstand.Doyouwantmetostealorembezzle?”“Ofcoursenot.Justgetoutofdebt.Notpaying$1,500amonthininterestis

justlikegettinga$1,200amonth,after-taxraise.Whydon’tyoudothatforyourself?”“Icangiveyouabouteightreasons,”Isaid.“There’sahousemortgage,a

homeequityloan,fivechargecards,acheckingaccountoverdraftnote,andadebttoaleasingcompany.Mymonthlypaymentsbarelycovertheinterest—letalonetheprincipal.I’mgoingtohavetogofurtherindebtwhenIbuyanewcar.Thenthekidswillbegoingtocollege.Iamresignedtobeingindebttherestofmylife.There’snootherway.”“Wouldyouliketobeoutofdebtandhavethatextra$1,200amonth?”sheasked.“Certainly,whowouldn’twantthat?”“Mostpeopledon’tseemtocare.Otherwisetheywoulddosomethingabout

it.”“Mostpeopleprobablydon’tknowwhattodo,”Iadded.“IfIcouldshowyouhowtogetcompletelyoutofdebtinlessthanhalfthe

time, without increasing your income and without paying any more towardreducingyourdebtsthanyouarepayingtoday,wouldyouwanttoselectbeingdebt-freeasoneofyourtargets?”

“More thananything,”Isaid,“buthowis thatpossiblewhenIcanbarelymakemyinterestpayments?”

“Inorderforyoutounderstandhoweasyitwouldbeforyoutogetoutofdebt, you need to understand the third law.But beforewe talk about that,weneedtofinishthisdiscussionabouttargetsorgoals.Shouldwepickbeingdebt-freeasyourfirsttarget?”

“Sure,”Isaid.“IguessI’lljusthavetotakeyourwordthatit’spossible.”Shewalkedovertoherdesk,pickedupapieceofpaperandapen,and

broughtthembacktome.“Writedownyourfirstgoal,”shesaid.“Why?”Iasked.“Youdon’tthinkIcouldforgetsome-thinglikegetting

outofdebt?”“Agoalthatisnotwrittendownisjustawish,”sheexplained.Iwrote

down,onthepaper,thatIwasgoingtobeoutofdebtinlessthanfiveyears.“Everydayyouseethingsyouwant,”sheexplained.“Afancycar,a

Caribbeanvacation,abiggerhome,abeautifulracehorse…”“Waitaminute!I’mnotintohorses.”“Itdoesn’tmatter.Nomatterwhatyouwant,youhavetohelpyourinternal

computersetprioritiesamongallthedesiresandwantsyoukeepthrowingatit,”shecontinued.“Youwantittoknowthatgettingoutofdebtismoreimportantthangettinganewsetofgolfclubs.Youdothisbywritingdownyourhigh-prioritytargets,thenreviewingthemfrequently,especiallybeforeyougotosleepatnightandfirstthinginthemorning.Ifyoukeeptellingyourcomputerthatgettingoutofdebtisyourfirstandmostimportantfinancialtarget,itwillgetthemessageandgotoworkmanipulatingallthefinancialdatayouarefeedingittohelpyougetoutofdebt.Doyouhaveanyotherfinancialgoals?”

“No.”“Yousaidsomethingaboutyourchildrengoingtocollegeinafewyears.

Doyouthinkestablishingafundtohelpthemgetagoodeducationwouldbeagoodsecondgoal?”

“Sure,”Isaid.“ButIdon’tknowhowIcandothat.I’lljusthavetotrustyou.”Iwrotedownsomethingabouthavingacollegefundwith$30,000initbythetimemyoldestchildstartedcollege.Ihadnoideahowthiscouldeverhappen.“HowaboutretirementmoneyforyouandJudy?”sheasked.“Anextra$2,500amonthontopofSocialSecuritywouldbenice,”Isaid.“Nice?”“Wonderful.Wewouldn’thavetoworryaboutmoney,orbeaburdenonthe

childreninouroldage.”“Writeitdown,”shesaid.Ididit,thentoldherIdidn’twantmorethanthese

threegoalstoworryabout.ShetoldmetoputtheoriginaltargetorgoalsheetinmyfilesafterIhadmadetwocopies—oneformycalendarandappointmentbookwhereitwouldbeeasytolookatduringmytravels,andonetoputbymybedwhereIcouldlookatiteverynightandmorning.Iagreedtodowhatsheasked,thinkingthatsettingtargetswouldn’tbeanyharderthantrackingdailyexpenses.ButIalsoknewthatsettingtargetsandachievingtargetsweretwodifferentthings.“Sowhat’sthethirdlaw?”Iasked.“Orareyougoingtomakemewait?”“Checkmate,”shesaid,catchingmebysurpriseandwinningourthirdchess

match.Nowthatwewerefinishedplaying,shewantedmetogo.ShesaidshewouldtellmeaboutthethirdlawafterIhadachancetostudygoalsandgoal-achievingtechniquesforawhile.Sothatevening,usingtheinternet,Ibeganmystudyonthepowerofgoalsetting.Manypeopledonothavegoals,ortheirgoalsaretootrivial.Fewpeople

realizethepowerinsettingagoalthendevelopingaplantoachievethatgoal.Inadditiontowinningthelotteryorfindingyournameonthewillofarich

uncle,thesimplestwaytobecomeamillionaireistosave$250amonth,averaging8.5%returnperyear,duringyourforty-yearworkingcareer.Ifyoudothat,you’llhave$1millionincashthedayyouretire.Ifyourhouseholdincomeis$4,200permonth,the$250isjust6%ofyourincome,lessthanhalftheamountsavedbysomeinternationalworkers.Ifyouhavea401kwithmatchingfundsavailableatwork,youcanjustabout

cutthe$250inhalf,orretirewith$2million.Buteverybodydoesn’twanttobeamillionaire.Someofusjustwantenough

sowearenotworryingaboutmoneyallthetime.Weneedenoughtopayforourchildrens’education,ownacomfortablehome,beoutofdebt,beabletoretirewhenwechoosetoinsteadofwhenwehaveto,andhaveenoughinaretirementfundsoinouroldage,wewon’tbeaburdentoourchildren.Ifyouonlywant

thesethings,youmightaswellsetyoursightsonbeingamillionaire,becausethat’showmuchyouwillneedtoaccomplishthesegoals.Butyoucanstilldoiton$250amonth,unlessyouhavefewerthan40workingyearsaheadofyou.Ifso,youwillhavetosavemoresoyoucangettherefaster.Intheabsenceofclearlydefinedgoals,weareforcedtoconcentrateon

activityandultimatelybecomeenslavedbyit.Ifthegoalsweretakenoutofbasketball,abunchofpeoplewouldaimlesslyberunningupanddownthefloordribblingaball.Whowouldwanttowatchthat?Whowouldwanttodothat?Ifthegoalpostsandendzonesweretakenofffootballfields,theLombardiTrophywouldgototheteamwiththenicestlegs.Ifthegoalsweretakenoutofhockey,you’dhave12guysontheicefighting.Somepeoplethinkthatwouldimprovethesport.Ifthegoalswereabsentinanysport,themostsignificantaspectof

recreationalpursuitwouldberemoved—goalsettingandstriving.Thereissomethinginherentthatmakesuswanttodosomethingbetter,faster,higher,shorter,orlongertowin.Andwhenitcomestotheaccumulationandpreservationofwealth,thesamegoal-settingprinciplesapply.Soyousayit’sfuntoscoretouchdownsandshootbaskets;butitisn’tfun—in

factit’sdownrighthard—toput$250amonthintoaninvestmentaccount.Nobodyeversaidgoalstrivingwassupposedtobeeasy.Infact,ifit’stooeasy,it’snotfun.WhatwouldhappeniftheDallasCowboysshowedupforaSuperBowlgame

andtherewerenoopponent?Whowouldsitaroundforsixtyminuteswatchingtheirstarplayerscoretouchdownsifnooneweretryingtotacklehim?Howfunwoulditbetowatchthebestbasketballplayerinthegameshootbasketsifthreeguysweren’ttryingtostophim?There’sapricetopayifyouwanttoachievesignificantfinancialgoals.Butif

youthinkit’stoohardandrequirestoomuchefforttobuilda$1millionnestegg,thinkhowtoughitwillbeifyouremainontheinterest-debttreadmillandhavenopensionwhenyouretire.GeneralGeorgeS.Pattonsaid,“Apintof

sweattodaywillsaveagallonofbloodtomorrow.”ScottPeckbeganhisbest-sellingbook,TheRoadLessTraveled,saying,

“Lifeisdifficult.Thisisagreattruth,oneofthegreatesttruths.Itisagreattruthbecauseoncewetrulyseethistruth,wetranscendit.Oncewetrulyunderstandandacceptit—thenlifeisnolongerdifficult.Becauseonceitisaccepted,thefactthatlifeisdifficultnolongermatters.”Thisbookisnotaget-rich-quickpanacea,butaguidetospendingmoneyin

suchawayastoachieveworthyfinancialgoals.The following are some time-tested guidelines for setting and achieving

worthwhilegoals,fromTheGameofWorkGoalsmustbewritten.Some people say they can remember their goals

withoutwritingthemdown,butiftheirspousecallsandasksthemtostopatthestoreon thewayhomeandpickup five things, theyautomatically reach for apieceofpapertowritedownthefiveitemssotheywon’tforget.

Goals not written down are wishes.Goals not written down are easilyforgotten or changed. Written goals that are internalized, by regular review,becomereality.Manypeopleresistwritingdowngoals.TheymustthinkthetopNFLteamcreatesitsplaysinthehuddle.Oneofthemaindifferencesbetweenprofessional and sandlot football is the amount of written documentation forachievinggoals.

A good team doesn’t just set goals to win or to be the best. Good goalprograms are detailed and specific—yards per carry, number of offensive anddefensive plays, plays per series, etc.Major goals are usually supported by agreater number of subtargets. Achieving subtargets helps you reach the finalgoal.

We need written goals in managing money. None of us would build a$300,000 homewithout a set of plans.Whatwould you think if your buildersaid,“Wedon’tneedplans.I’vegotaprettygoodideawhatkindofhouseyouwant.Let’sbreakgroundinthemorning.”

But an income earner producing $30,000 a year for ten years, a total of

$300,000,willspendeverypennywithoutasetofplansorpriorities.Thenattheendoftenyears,havingnothingtoshowforhis$300,000,he

will wonder why his outcome is not as he had envisioned it. Had he simplyplottedhispriorities,hisdreamwouldhavebecomeareality.

Goalsmust be your own.You no doubt have observed people who gothrough life giving the minimum daily require- ment at work. Yet, when thewhistle blows, they are off to coach a little-league team, play in a bowlingleague,buildamountaincabin—dosomething theyenjoy.You’venoticed thetransformation, the new energy, the intelligence, the creativity, the increasedendurance, and capacity for work they have when they are doing things thatinterestthem.

Nobodycansetyourfinancialgoalsforyou.Ifyouaregoingtobedoingalloftheworktoachieveyourgoals,theyneedtobeyourownpersonalgoals,nooneelse’s.Marydirectedmeinsettinggoals,butintheend,theyweremygoals,nothers.

Goalsmustbepositive.VinceLombardisaidtheobjectiveoffootballistowin—fairly,squarely,andbytherules,but towin.Thegoal insports isnot toavoidalossordefeat.HowmanytimeshaveyouseenaPGAgolfergoingdownthestretchsuddenlychangehisgameplantoseehisleadslipaway?Heisbeatenbecausehelosesthemomentumofhisearlierpositiveattack.

Possibly themost commongoal inAmerica is to loseweight.Sometimeswefeelitwouldbeeasiertocutoffanarmthandiettolose20pounds.Insteadofhavinganegativegoalmeasuredinpounds,itisbettertosetapositivegoaltoachieveanoptimalweightandmaintainthatweightonceachieved.

One of the problemswith losingweight is thatwe,more often than not,gainitbackagainandperhapsmore.Thereareseveralreasonsforthis,includingnegative feelings and thoughts associated with taking off unwanted pounds.Negativegoals arenotpleasant tovisualize, so the tendency is to avoid them,forget them.Doyouwant tobe thinkingaboutbankruptcyall the time ifyourfinancial goal is to avoid it? Does it sound fun to constantly think about

budgeting,belttightening,anddeprivation?Itismuchmorepleasanttovisualizehowcontentwewillbewhenwehavenodebt,howmuchfunitwillbetogetacall from our stockbroker saying our $600,000 pension fund earned another$50,000lastyear.Thinkhowproudyouwillfeelwhenyouwriteoutacheckfor$12,500tocoverthefirstyear’stuitionwhenyourchildgetsacceptedtocollege.

Inbasketballandfootball,theycountthepointsyouscore,nottheonesyoumiss.Financialgoalsshouldbethatwaytoo.

Goalsmustbemeasurableandspecific.Insports,wedemandnumbers,sometimes two or three places to the right of the decimal point. The times ofswimmers,speedskaters,anddownhillskiersareallmeasuredinthousandthsofseconds, and in order to separate one athlete from the other, these exactmeasurementsareessential.

Why,howmuch,andbywhen?Ifyoucan’tmeasureit,howwillyouknowwhenyouachieveit?Evenintangiblegoalsneedtangibleindicators.Ifyouhaveagoaltobemorepatient,counthowmanytimesyouloseyourtemperwithyourchildreninamonth.Ifthenumbersdrop,youknowyourpatienceisincreasing.Don’tsay,“Iamgoingtobeabettersalespersonnextyear.”Instead,writedownhowmanysalescallsyouaregoingtomake.

Ifyouputahundredpeopleinaroomandaskthemhowmanywouldliketobefinanciallyindependent,allofthehandswillgoup.Thenifyouaskhowmanyhaveacurrentfinancialstatementlistingalloftheirassetsandliabilities,nomorethantenhandswillgoup.It’shardtogetwhereyouwanttobeifyoudon’tknowwhereyouare rightnow.Asayingat IBMstates, “Yougetbetterresultsfromwhatyouinspectthanwhatyouexpect.”

Now,ifyouaskhowmanyinthegrouphaveprojectionsofwhattheywanttheirfinancialstatementtolooklikeinfive,ten,fifteen,ortwentyyears,maybeone handwill go up, and that personwill become yourmillionaire. It doesn’tmakeanydifferencewhathisorherbackgroundis,howmuchmoneyheorshehas,orwhathisorhercurrent income is.That individualhasaplan,andwiththat plan, you cannot turn the person aside. Goalsmust answer the questions

why,howmuch,andbywhen.Goalsmustbestatedinthemostvisibletermsavailable.Whengoalsare

measured in real terms, everybody knows the score. It’s harder to rationalize,fudge,andcheat.There’snomonkeybusiness.Whenthepointsaredisplayedonthescoreboard,everybodyknowswhatishappening,whoisahead,andwhoiscatchinguporwideningthelead.

Insteadofsettingagoaltobecomeamillionaire,setagoalto be completely out of debt by a specific time; have X dollars in your

pensionfundbyacertaindate;beabletopaycashforthatnewDodgetruckbyacertaindate; orbe able topay for thatEuropeanvacationby the summerof acertainyear.

Goalsmust contain adeadline. If youdon’t have a deadline, youdon’thaveagoal.Goalsmustincludehowmuchandbywhen.Themostexcitingplayinallsportsoccursinthelasttwominutesofthehalfandbeforetheendofthegame.

Deadlinesallowthestudentwhohassleptinallsemestertostayupallnightstudying for the final exam. Because of deadlines in telethons, 40% of themoneyisraisedinthelast20%ofthetime.OneofMurphy’sLawsstates,“Thefirst10%oftheworkconsumes90%ofthetimeallowedforthejob.Thesecond90% requires 90% of the time too, and that’swhy jobs take twice as long tofinish.”

Deadlinesarethefoundationofcommitment.Deadlinesaretheadrenalineboosters. Deadlines are the instigators of achievement and inventiveness. Aperson four years from retirement has a lot more motivation to save than apersonfortyyearsfromretirement.Agoalsprogramwithoutdeadlinesismerelyaphilosophicalstatement.

Goalsmust contain personality changes.The reasonmany of us don’tearnmoremoneyisthatwewouldn’tknowwhattodowithitifwehadit.Toofrequently,poorpeoplehavepoorways,notjustinmanagingtheirmoney,butinmanagingtheirlives.

MaryhadmereadabookbyJ.PaulGetty.ThetitlewasHowtoBeRich.Nothowtogetrich,butberich.Hetalkedaboutresponsibilitiesassociatedwithhaving wealth and the personality traits necessary to develop and managewealth. PaulMeyer said, “Youmust first set goals to become before you setgoalstohave.”

Goals are the intangible characteristics thatmake winners who theyare.You cannot become a great downhill skier if you are afraid of personalinjury.Youcannotliveon90%ofyourincomeifyouarefrantictokeepupwiththeJoneses.

If you take an average individual in an average job earning an averageincome,youcanguessthatpersonwillnevergetaheadaslongasthingsstaythesame.Butput thatperson ina traumaticsituation,maybeacostlydivorceoramajormedicaloperation,andthatpersonwillrisetotheoccasionandgenerateanincreasedincome;orhe’llfallbackintohisoldhabits,givinguporlookingtosomeoneelseorthegovernmenttomeethisobligations.Weshouldn’twaitforalife tragedy tomake us change;we can use target setting and goal striving tochangeonourown.Bysettingandachievingpersonaltargets,wecanchangebychoice.

Goalsworkbetteriftheycontainbenefitsandrewards.Agoodideainsettinggoals is toestablishanarbitraryrewardwhenthegoal isaccomplished.When selected debts are paid off, treat yourself and your family to that greatvacationintheSouthSeas.WhenalltheVISAcardsarepaidoff,treatyourselfandyourspousetoalobsterdinner—butdon’tusetheVISAcardtopayforit.Wouldn’t it be better to buy a new suit as a reward for paying off the homeequityloaninsteadofbuyingonebecausesomebodydecidedtoputthesuitsonsale?Every timeyouandyour spouseget throughanothermonthof livingon90%ofyourincome,treatyourselvestodinnerandamovieinthecity.

Goalsmustberealisticandobtainable.Ayardhere,ayardthere.WoodyHays, one of the great legends in college football, is synonymouswith “threeyardsandacloudofdust.”Withthatconcept,WoodydominatedBig10football

fordecades.The three-yards-and-a-cloud-of-dustattitudewillgetyoucloser toyour financial goals than any instant accomplishments or get-rich-quickschemes.

FinancialGoals

Identifyyoursixmostimportantgoals____Becomedebt-free.____Retireearlywithfinancialsecurity.____Buy/payoffahome.____Establishanemergencyfund.____Reducefinancialstress.____Establishafundtocareforagingparents.____Gaincontroloffinances.____Reducetaxes.____Ownabusiness.____Havemoneyforadreamvacation.____Ownabettercar,freeandclear.____Beabletofundcollegeeducationsforchildren.____Helpchildrenwithdownpaymentsforfirsthomes.____Ownafarmoramountaincabin.____Ownamotorhome.____Buildaswimmingpoolandspa.____Other_________________

Inthespaceprovidedbelow,writedownyourfinancialgoalsinorderofimportance,includingtheamountofmoneyneededtoaccomplisheachgoalbyeachtarget-completiondate:

Justrememberthateventhoughtheremaybethingsinlifemoreimportanttoyouthanfinancialgoals—alastingmarriage,happychildren,fulfillingcareers,humanitarianserviceprojects—yourabilitytofunctioninthemoreimportantareasoflifeisgreatlyinfluencedbyyourfinancialstability.Iffinancialworriesarecausingheartpalpitationsandhighbloodpressure,youarelesslikelytohelpyournewneighborsunloadthemovingvan.Ifyoucan’tpayyourphonebill,youarelesslikelytodropeverythinganddrivetoAlabamatohelpfloodvictims.Howwouldyoufeelifthedoctorsaidyouneededtomoveyourspousetoamilderclimate,butyoucouldn’taffordtoquityourjobwithoutcripplingyourselffinancially?Havingfinancialorderandcontrolinyourlifelaysafoundationthatenablesyoutodevotemoretime,energy,creativity,andmoneytofamily,hobbies,evencommunityorhumanitarianservice.

Maryremindedmefromtimetotimethatwhatweweredoingwasnotabouttheloveofmoney,buttheloveoflife;aboutabetterlifeavailabletoanyonewillingtochangespendinghabitsinordertoachieveworthyfinancialgoals.Theamountoftimeyouspendworryingaboutmoneyisininverseproportiontohowwellyoumanageyourmoney.Ifyoudon’tlikeworryingaboutmoney,applytheprinciplesinthisbooksoyouwon’thavetospendsomuchtimefrettingoverfinancialproblems.

WhenIhadlearnedeverythingIcouldabouttargets,IreturnedtoMaryfor

anothergameofchess,andinstructiononthethirdlaw.

Targeting—thesecondlawoffinancialprosperity.

Thatwhicheachofuscallsour“necessaryexpenses”willalwaysgrowtoequalourincomeunlesswe

protesttothecontrary.—GeorgeClason

TheThirdLaw

ThenexttimeIwenttoseeMary,IfiguredIknewevery-thingtherewastoknowaboutgoals,andwasreadyforthethirdlaw.Assoonassheinvitedmein,Iaskedhertotellmeaboutthethirdlaw.Withoutrespondingimmediatelytomyquestion,shewenttothekitchenandfixedeachofusacolddrink.Asshereturnedtoherplaceatthesofa,shehadthatlookinhereyelikeshewassizingmeupagain,tryingtodecidehowmuchIwasreadytoreceive.

“In order for your goals to become reality, you need a plan to follow inachievingthem.Youcan’tputarealisticplaninplacewithoutunderstandingthethirdlaw,soIprobablyshouldn’tmakeyouwaitanylonger.”

“Good,”Isaid,“I’mlistening.”“You’llfindthemoneytofundyourgoalsbylivingonlessthanyouearn.

Thethird lawis to liveonless thanyouearnsoyoucanhaveasurplus togetyououtofdebtandinvestinassetsthatappreciate.”

“With two teenagersandabusywife, there isno surplusatmyhouse,” Isaid.“Thereisneveranythingleftoverattheendofthemonth.Evenwithallthetracking,Iambarelyabletopaymybills.Idon’tknowhowwecouldspendany

less.”“The third lawdoesn’t sayyouhave to spend less, just spenddifferently.

Youpayyourselffirstinsteadoflast.Youdon’twaituntiltheendofthemonthto see if anything is left over for yourself. You pay yourself first, thenmakeyourselfliveonwhat’sleftfortheremainderofthemonth.Thekeytohavingasurplus foryour financialgoals is topayyourself firstand then liveonwhat’sleftover.”

“Thatdoesn’tsoundeasy.”“Itcanbe,butwhosaidlifeissupposedtobeeasy?Noone,regardlessof

income,canbefinanciallysuccessfulunlesstheyliveonlessthantheyearn.Thethirdlawisabsolutelyessential.Icallittrimming.”

“Idon’tknowifIcandoit,”Isaid.“There’ssomeoneIwantyoutomeet,”shesaid.“Julio,”shecalled,turningherheadtowardthebackofthehouse.Aminute

later, her gardener entered the room, a handsome young man, perhaps in hisearlythirties.

“Julio,”shesaidtohim.“Iknowthisrequestissomewhatpersonal,butIwouldlikeyoutoshowPaulyourbankbook.”“Noproblem,”Juliosaid,withastrongaccent.Heremovedatinybankbookfromhisshirtpocketandhandedittome.

Therewere lots of pages of transactions, only deposits, and the amountswere all the same: $625. Julio had been depositing $625 a month for whatseemedyears.Thebalanceintheaccountwasjustunder$25,000.IhandedthebookbacktoJulio.Marythankedhim,andtoldhimhecouldreturntohiswork.

“Julio earns $875 amonth after taxes andwithholdings and saves $625,”shesaid.“Youearnfivetimesasmuchandcan’tsaveanything.Yououghttobeashamedofyourself.”

“Hedoesn’thaveawifeandtwochildren,”Iprotested.“Hehasawifeandfourchildren,”Marysaid.“Hesendsthem$150,keeps

$100,andsavestherest.Igivehimroomandboardinadditiontohissalary.

Otherwise,hecouldn’tsaveasmuch.”“Whydoeshedoit?”Iasked.“He is saving so he can pay cash for a good used school bus.When he

returnstohishomeincentralMexico,thebuswillsupporthimandhisfamily.Hewillbe financially inde-pendentbecausehe is able to liveon less thanheearns.Youmustdothesame,butitwillbemucheasierforyou.”

“HowmuchmustIcutour livingexpenses?”Iasked,stillnotsure itwasevenpossible.

“All three of your financial goals are easilywithin reach if you can trimyourlivingexpensesto90%ofyourincome.”

“Idon’t seehow livingon90%ofmy incomewillgetmeoutofdebt infiveyears,”Isaid.

Shehandedmeanotherpieceofpaperandaskedme towritedownallofmydebts, the interest Iwasbeingchargedoneach, themonthlypayment,andthe balance remaining. It wasn’t long until I had the entire page filled withnumbers. Then, on another piece of paper, she hadme list the debts in order,startingwiththeonewiththelowestbalance.

She askedme how long it would take to pay off the small- est debt if Iappliedanextra$300amonthgeneratedbyourtrimming.ItwasaVISAcard,andItoldherIwouldhaveitpaidoffinlessthanthreemonths.

Thensheaskedhowlongafterthatitwouldtaketopayoffthenextdebt,anotherVISAcard, if I added the extra$300 to the regular payment, plus thepaymentIhadbeenmakingontheretiredfirstdebt.

“Twomonths,”Isaid.Wecontinuedthisprocess,eventuallyusingupfivesheets of paper. Each time a debt was paid off, we added its payment to theacceleratedpaymenton thenextdebt.By the timewegot to the lastdebt, thehousemortgage, Iwasmakingnearly triplepayments. Ifmycalculationswerecorrect, and I had to do a little guessing, all ofmydebts, including the housemortgage,wouldbepaidoffinfourandahalfyears.

I went over the numbers a second time, thinking I must have made a

mistake. I realized I had probably been too conservative the first time. If Ifollowed this payment schedule, Iwould be out of debt in about four years. Icouldfeelchillsinthebackofmyneckandatearpushingitswayintomyeye.Ithadneveroccurredtomethatanythinglikethiswasevenpossible.

Butthekeywastrimming,findingthatextra$300amonth,andkeepingthemonthly payments at the same level, even after debts were eliminated. I stillwasn’tsureIcoulddoit.

“Why don’t you give me a debt-consolidation loan?” I asked. “Then itwouldbeeasier. Icoulduseyourmoney topayoffall the loanscostingmorethan8%.”

“Wehave an agreement,” she remindedme. “First youmust demonstrateyour ability to live the laws. Your tracking is coming along fine. You havewrittendownsomeworthytargets.Nowyouhavetotrimyourlivingexpensesto90%ofyour income.It is timeforPaulSmith tobecomea littlebit likeJulio.Remember,thereisonlyonemorelawafteryoumastertrimming,thenyouwillhaveaccessto$2million.”

Afterreturninghome,Istayedupuntil2a.m.poringovercanceledchecks,bills,andmytrackingrecords.Iwasdeter-minedtofindanextra$300formyDebtEliminatorprogram,but I stilldidn’tknowwhere itwouldcome from. IhadalreadycutbacktheDVDrentalsandeliminatedtheoverdraftcharges.

ThefirstbigbreakthroughcamewhenIwaslookingatmybankstatement.Thepreviousmonth,Ihadnoticedandeliminatedtheoverdraftcharges.NowIdiscovered additional charges for things like analysis, check printing, andservice.Lookingatmywife’sstatements,Ifoundsimilarcharges.Togetherwewere paying about $50 amonth for the convenience of checking. Judy and Italked about it, and decided to close one of the accounts. We decided to gowithouttheadditionalcheckingaccountuntilwehadenoughsavingstoqualifyforthefreecheckingservices.

We reducedourcable television service level. Judydecided shecoulddoherownnails,andshestartedcuttingBilly’shair.Minetoo.

Lookingattheitemizedchargesonthephonebill,Idis-coveredwewerepaying close to $30 amonth for things like call forwarding, callwaiting, andsomeotherservicethatwouldgiveusthephonenumbersofallthepeoplewhohadcalledwhileweweregone.Icalledthephonecompanyandcanceledthoseservices.

In going over the long-distance calls, I discovered Judy enjoyed frequentandlengthytelephoneconversationswithhermotherinCalifornia,duringworkdayswhenratesarehighest.Ipersuadedhertosaveusanother$10amonthbycallinghermothernightsandweekends.

We cut our DVD rentals even more when I discovered DVDs could becheckedout freeat the library.WhenIpushedfor thischange, JudyremindedmeaboutallthemoneyIspentonbookstoreadonmyroadtrips.ShesuggestedIcouldsaveanother$20amonthifIcheckedbooksoutofthelibrarybeforemytrips.Iagreed.

Catchingthespiritofwhatweweredoing,JudyofferedtowashmyshirtsandherblousesinsteadofsendingthemtothelaundryifIwoulddothedinnerdishesthreenightsaweek.Iagreed.

Iturnedthewaterheaterdownfrom160degreesto140.Thegascompanysaid that would save us at least $10 a month. Billy and Lisa agreed to buydiscount clothes when I told them I was working on a program to pay theircollegetuition.

We cleaned out the basement and donated $3,000 worth of items toGoodwill, adeduction thatwould saveabout$800at tax time,or about$60amonthforayear.Ididn’treplacethechopped-upChristmastree.

Withthearrivalofgoodweather,insteadofgoingouttodinnereveryweek,Judy and I started going on picnics. It was less expensive than going torestaurants,andalotmoreromantic.Wesavedabout$40amonth.

Once I got everyone tracking, I was shocked with how much we werespendingforlunches,andmostofitwasonfastfood.Justbybecomingawareofthehabitwehad fallen into,mostlyone that I had fallen into,we realizedwe

couldcutourlunchexpenseinhalf.Toaccomplishourgoal,Icommittedtoeatlunches Imadeathomewhen Iwasworking in town;andwhen Iwason theroad,Iwouldeatfruit,carrots,andcrackersforlunch.

Anicesidebenefit I realized in the first twomonthswas losingabout10pounds.IfeltsogoodIstartedjogging—ourhouseholdfinancesandmyhealthimproved at the same time. Through this process, I learned that as I beganimplementing simple yet powerful financial changes intomy life, the benefitsspilledoverintomanyotherareasformeandformyfamily.

Thekeytolivingonlessthanyouearnistopayyour-selffirst,assoonasyougetyourpaycheck,andthenliveonwhat’sleftover.Thosewhowaituntilthe end of themonth to see if anything is left over before paying themselvesnever have any extra money for their financial goals. By default, they arehelpingfundeveryoneelse’sretirementratherthanfundingtheirown.

Everyoneshouldask,“Whoare themost importantpeople inmylife?”Ifit’s you and your loved ones, then maybe it’s time to take a hard look at aspending program that is keeping the stockholders at the credit card companyandEddieBauer happy, but is doing nothing to get you and your family anyclosertoyourfinancialgoals.

During theearlypartofyour financialprogram,whenyouarepayingoffdebts, itmaynot seem that you are payingyourself first.After all, the excessmoneyisgoingtocreditors,andyouwillneverseeitagain.

Youmustlookataccelerateddebtpaymentsasaprocesstopreventfutureinterestburdens.Ifyoupayoffa$125,000housemortgagein15yearsinsteadof30,youwillsave$115,000ininterestpayments.Youmustalsorealizeitdoesn’tmakeeconomicsensetoputyourmoneyintoa1%or2%certificateofdepositwhenyouarepaying theequivalentof25%interestonoutstandingcreditcardbalances.

Asageneralrule,theinterestyoupaywhenyouareindebtishigherthanthe interest you will earn when you are out of debt and investing money.However,donotforgetthattheexcitement,motivation,anddisciplinetoachieve

comes from eliminating debt while forming the savings habit—these twoprinciplescombinedproducethemostpowerfulwaytopayyourselffirst.

Afteryoumake thedecision topayyourself first, thenext step is to stopbuying things you can’t pay forwith cash.Use a credit card for convenienceonly,not toburyyourselffurther indebtpurchasingthingsthatdonotsupportyour commit- ment to financial prosperity. Discipline yourself by paying thecreditcardoffeachmonthbeforeincurringfinancecharges.Ifthebalanceisnotpaidoffattheendofthemonth,cutupthecardoratleastputitawaywhereitisnotreadilyavailabletouseuntilthebalanceispaidinfull.

Somepeoplehaveahardtimeunderstandingthattrimmingisnotanendtospending, but redirecting the way you spend. In applying the four laws, youbecome a power spender, realizing the most efficient use of your money inachievingfinancialgoals.Trimmingisexciting!It’sreallyredirectingspendinginordertoaccelerateyourrateofprogress.

Onceapersonhasinitiatedatrackingprocesssoeverydollarisaccountedfor, set his or her financial goals, and trimmed away the fat in an effort toredirect those dollars toward achieving appropriate financial goals, then thatperson usually becomes more motivated than ever to increase earnings. Theindividualrealizes,“Hey,ifIhadanother$300amonthcomingin,Iwouldbeoutofdebtinhalfthetime.Iwouldbeamillionairebyagefifty-fiveandcouldretiretenyearsearly.

Wow!WherecanIfindanother$300amonth?ButifIcouldfigureoutawaytoearnanother$600amonth…”

Whenfirstconfrontedwiththechallengeoffindingadditionalmoneytofundfinancialgoals,mostpeoplethinkthemoneysimplyisn’tthere.Wecan’ttakelunchmoneyfromthekidsorgasmoneyfromDad.Wecan’tsellthehouseinthesuburbsandmoveintoanapartmentinthecity.Wedon’twanttobesocheapthatweputnickelsinsteadofdollarsonthecollectionplateatchurchortakethedogtothepoundsowewon’thavetobuyanymoredogfood.

Whatpeopledon’trealizeisthatthesimpleprocessoftrackingexpenses,as

discussedinthisbook,willhelpthemfindextramoneytheydidn’tevenknowexisted—like themanwhodiscoveredhewaspayingpremiumson twohealthinsurancepolicies.Hefoundanextra$250amonthwithouthaving togiveupanything.Whataboutthesmall-businessownerwhostartedtrackingeverydollaronlytodiscoverattaxtimehehadanextra$3,750indeductions?Ifhe’sinthe30% tax bracket, those additional deductions saved him a thousand dollars,almostahundredamonth.Still,nobodyhashadtodoanybelt-tightening.

Andwhosaysbelt-tighteningisalwaysbad?Supposeanindividual,afterafewmonthsofdetailedtracking,discoversheandhiswifearespendingnearlya$125 a month on fountain drinks and another $125 on alcoholic beverages.Neitheronehadanyideatheywerespendingandconsumingsomuch.Theyarefaced with the hard truth that maybe they won’t even be around to enjoyretirementiftheycontinuefillingtheirbodieswithsomuchsugar,carbonation,andalcohol.Strictlyforhealthreasons,theydecidetocuttheseexpensesdownto$50amonth,andbingo,theyhaveanextra$200amonth,almostenoughbyitselftofundtheirretirementprogram.

Then there’s thebusycouple like Judyandme,whoareconcernedaboutthe below-average report cards of their two teenage children. While trackingfamilyexpenses,theyrealizetheyarespending$150amonthoncabletelevisionandDVDrentals,andneitheroneoftheparentswatchesmorethanthreeorfourhours of television a month. Perhaps if this expense were eliminated, ordrasticallyreducedtoabout$25amonth,itwouldbeeasiertogetthechildrentoread and do homework. Howmuch would that $125 a month become in tenyears if itwere investedat8%inacollegeeducation fund for thechildren? Itwould be $22,868. The children might call such a cut severe belt-tightening,unnecessarydeprivation,ordownrightchildabuse,buttrytofindaprofessionaleducatororcounselorwhowouldnotapplaudsuchamove.

Present value tables are a wonderful motivation when you start to trim.Thesetablestellyouwhatthe$5yousavedbybringingyourlunchtoworkwillbeworthwhenyou retire. If youdecide tobuy$2,000worthofmutual funds

insteadofasnowmobile, thesetableswill tellyouhowmuchitwillappreciateby the time your children start college or when you retire. The table on thefollowingpageshowshowdifferentamountsofmoneyinvestedmonthlyat10%bypeopleofvariousageswillgrowovertimeinto$1millionto$3millionnesteggs.

Onceyour trackingprogramis inplace, the firstandobvious trimming isgetting rid of the waste and unwanted spending, like some of the itemsmentionedearlier.Thenyoutakeahardlookatyourgoals—whereyouwanttobe and where you are now. Youmeasure your current net worth (assets lessliabilities) and subtract that amount from the net worth you would like toachieve,possiblyatretirement.Dividethisamountbythenumberofyearsuntilretirement,andyouhaveaprettygoodideahowmuchtrimmingyouaregoingtohavetodo.Keepinmindthatasyougetclosertoyourgoal,yourassetsarenot only appreciating, but are producing income to buy additional assets, aprocesscalledcompounding.Inotherwords,onceyougetoutofdebtandstartearninginterest, timebecomesyourfriend.A25-year-oldwhobitesthebulletandsaves$500amonthuntilheisthirty-five,thendecidesheistiredofsavingandnever puts away another nickel the rest of his life, if he never spends themoneyhesavedanditcontinuestocompoundat8%peryear,atagesixty-fivehewillhave$1,000,324.

Ontheotherhand, ifa55-year-oldworkerwhohasneversavedanythingdecidestogetseriousaboutretirementandstartssaving$500amonth,whichheinvestsat8%,tenyearslaterat65hewillhave$91,473.

Bothoftheabovepeoplesaved$500amonthfortenyears.Bothearnedanaverage annual increase of 8% on their savings.Yet the young person earned$908,851more than the older person. The difference is time. The sooner youstartonasavingsandinvestmentprogram,thebetter.Itisbettertosavenowandplaylater,thantoplaynowandsavelater.Timeismoney,andthesooneryougetitworkingforyou,thebetter.

Ifyouarealready50or55,don’tassumeit’stoolateforyoutotakecontrolofyour finances. Ifyoustartputting$500amonth intoan8%mutual fundatagefifty,youwillhave$295,510whenyouretireatage70.That’sa lotmorethanifyoudidn’tstartsavingatall.

Inaddition,peoplewhoareincontroloftheirmoneyhavethecapacitytobemorecharitable.If itwerenotforcharitablepeopleandcharitableattitudes,

our churches, museums, art centers, hospitals, schools, and society in generalwould suffer. Charitable people have trimmed unnecessary expenses andredirected them to greater priorities, which affords them the privilege ofdonating to worthy causes. True financial success requires proper financialbalance.

Thekeytoanykindoffinancialsuccessislearningtoliveonlessthanyouearn,therebycreatingasurplustoinvestinassetsthatearninterestorincreaseinvalue.Trimmingistheprocessbywhichwedothis.Butnomatterhowgoodweareattrimming,itneverseemstoworkifwewaituntiltheendofthemonthtoseehowmuchisleftovertoinvest.Payyourselffirst,notlast.Assoonasyougetyourpaycheck,takethe5%,10%,or15%youhaveidentifiedassurplustoreducedebtandbuyinvestments,andtakethatoutfirst,forcingyourselftoliveonwhat’sleftover.

Most people who do this say they hardly notice any difference in theirlifestyle. The tracking process alone can usually uncover enough inefficientspendinganddownrightwaste tomore thancovera10%debteliminationandsavingsprogram.

MostAmericans, if theystartearlyenough,canachievefinancialsecurityona10%savingsprogram. If theirgoalsaremoreaggressive,or if theydon’tstartuntil later inlife,10%willnotbeenough.Butbeforeyoudeterminehowmuchsurplusyouhavetocreate,youmustfirstfigureoutwhereyouare,whereyouwanttobe,andhowmanyyearsyouhavetogetthere.Thesenumberswillgiveyouaprettygoodideawhereyouhavetostart.

At first, I didn’t believeMarywhen she toldme that after trimmingmyliving expenses to the 90% level, I wouldn’tmiss that extra 10%. She said Imightevenwanttostartsavingmorethanthat—maybe15%or20%.ShesaidifIwouldsitdownandfigureouthowmuchquickermyfinancialgoalscouldberealizedwiththatincreasedpayment,theideaoftrimminglivingexpensesevenmorewouldbeveryattractive.

Shesaiditisimportantthatyoulookattheamountyouaresavingnotasa

sacrifice,butasapaymenttoyourselftohelpachieveyourmostdesiredfinancialgoals.Thethirdlawisaboutpayingyourselffirstandthenlivingonwhat’sleftover.

Trimming—thethirdlawoffinancialprosperity.

Theonlythingworsethaninvestinginthingsthatdepreciate

ispayinginterestonmoneyinvestedinthingsthatdepreciate.

—BlaineHarris

Debt-Free

ThenexttimeIvisitedMary,Ihadhighhopesoflearningthefourthandfinallaw.ButaswesatdownforwhatIthoughtwasourfinalgameofchess,shewantedtotalkaboutsomethingelse.Debt.

“HaveyoueverwonderedwhymostAmericanfamilieswhoearnasmuchasyoudoseemtobestrugglingfinancially,whenmostofthefamiliesoftheworldliveonlessthan$225amonth?”sheasked.Ididn’tsayanything.

“You nod with understanding when you see the financial struggle of afactoryworkerearning$10anhour,”shecontinued,“butyoushakeyourheadinamazementwhenamedicaldoctorwithaguaranteedsix-figureincomedeclaresbankruptcy. Regardless of income, most people are broke—just at a differentlevel.

“Therewasatimeinthiscountrywhenthepersonwhospentallofhisor

her income without saving anything was con- sidered foolhardy,” she added.“Todaythepersonwhospendsall thatheearns isonly lessfoolhardy than themillionswhospendmore than theyearn—thanks toeasycredit.Why is it thatthepeopleintherichestnationintheworldfeelthepoorest?”

“Idon’tknow,”Iresponded.“Because they don’t knowhow tomanage theirmoney.”Shewent on to

explainthatnotonlydoweearnmorethanmostofourworldneighbors,butweworrymore too.Worrying aboutmoney lowers the quality of life and causeshealth problems. In addition, 89% of divorces are attributed to financialmismanagement.

Partof theproblemis thequalityandquantityofadvertisingtowhichweareexposed.Everydaywearebombardedwithadvertisementsforhomeequityloans.There isn’t a day that goes bywithout being encouraged to consolidatedebts using the ever-so-precious equity in our home. “We’ll help you get themoneyoutofyourhousesoyoucanuseitonthingsyoujustcan’tlivewithout.”

Everydaywegetmailersofferingnewcreditcards,somewhereourcreditacceptanceisguaranteed.Ourchildrenstartgettingthesemailerswhentheyareseniorsinhighschoolfromcompaniestryingtolurethemintotheinteresttrapbeforetheyknowbetter.

Every one of these ads, just like every cigarette pack, should carry awarningthatconsumerdebtisdangeroustoyourhealth,yourmarriage,andtheoverall quality of your life. The home equity ads convey the feeling thatconsumerdebtisawarm,fuzzyblanketthatwillmakeyoufeelbetterandgiveyoupeaceofmind.Nothingcouldbefurtherfromthetruth.

Long after the thrill of the purchase has passed, the financial burdencontinuestolingerendlesslyandnegativelyaffectsallaspectsoflife.Itshouldbeobviousthatifwecontinuetoborrowtheequityoutofourhometopayforyesterday’smealsandwornoutshoes,we’vesacrificedwhat’smostimportantinlife forwhatwewanted at themoment.No home equity loan should ever begranteduntilafterwehavemodifiedourspend-inghabitsthatcreatedtheneed

fortheloaninthefirstplace.Thefirst step toward financialpeaceofmind, ifyouaresickand tiredof

thattrappedfeeling,istomakethedecisiontodosomething,totaketheno-debtpledge.ItoldMaryIhaddonethat.

Mary said youmust set your standard of living lower than your level ofincome,whilemanyofyourneighborsandfriendssettheirstandardoflivingatthelimitoftheircredit-worthiness.

Mary said she knew a Vietnamese couple who lived on 20% of theirincomewhilesavingup tobuy their first restaurant.Mostofuscangetoutofdebtandachievefinancialsecuritybylearningtoliveon90%ofourincome.

Once you start living on less than you earn, you use the excess, or theamountyoupaytoyourself,toacceleratedebtpaymentsandtobuildwealth.

Ifyoudon’tlikelivingonlessthanyouearn,andyoudon’twanttogiveupthevacationhomeinPhoenix,eventhoughyouearnonly$12.50anhour,thenyououghttoseriouslylookatincreasingyourincome.

Youcanliterallyspendyourwaytowealth.Somepeoplefalselyassociatethewordspendwith“waste”or“squander.”Tospendistoallocate.Weallhaveresourcesthatneedtobeallocated—liketimeandmoney.Howwemanagetheallocationoftheseresourcesdeterminesthequalityofourfuture.

Eventhoughwemustlearntoliveonlessthanweearn,westillspendallthat we earn. With a good financial plan, we don’t spend less, we spenddifferently.Wedirectourmoneyintochannelsthatgetusoutofdebtandbuildfinancialsecurity.Insteadofspendingourwayintoadeeperanddeeperhole,wespendourwaytohappinessandsecurity.Otherpeopledoit,andsocanwe.

Marysaidmostpeoplecouldgetcompletelyoutofdebt inabouthalf thetimewithout payingmore eachmonth than they are paying todayonmonthlydebt payments. Many people don’t believe this is possible, but it is truenonetheless.

ThefollowingisacasestudyofJohnandJillSample,whoplannedtohavetheir$31,131inconsumerdebtpaidoff insixyears,makingregularpayments

that included $8,284 in interest. While using the Debt Eliminator programoutlinedattheendofthischapter,theywereabletopayofftheirdebtsinthreeyears and two months, paying $6,888 in interest. By adding another $100 amonth,theycouldhavebeenoutofdebtintwoyearsandtenmonthsandsavedanother$700ininterest.

ThekeytomakingtheDebtEliminatorprogramworkistokeepthedollaramountofmonthlypaymentsatthesamelevelasdebtsareretired.Forexample,whentheSamples’dentistwaspaidoff,theytookthe$30amonththeyhadbeensendingtothedentistandappliedit tothenexttargeteddebt, thusacceleratingitspay-downtime.

Let’sassumethatafterpayingoffalltheirdebts,usingthe$100accelerator,theSamplescontinuedmaking thesamepayment intoan8%investment fund.Bythetimesixyearspass—thetimetheyoriginallytargetedtogetoutofdebt—insteadofjustbeingoutofdebt,theyhave$49,251intheirinvestmentfund.Inotherwords,byusingtheprinciplestaughtinthisbook,insixshortyears,theSamples went from $31,131 in the red to $49,251 in the black, an $80,382improvementintheirfinancialnetworth!

ThefirstchartgivesabreakdownofeachoftheSamples’debtsincludingbalances owed, interest rates, monthly mini- mum payments, number ofpaymentsremaining,andrealdebt,whichisthesumoftheremainingpaymentsincludingprincipalandinterest.ThefirstchartalsoshowshowlongitwilltaketheSamples togetoutofdebton their current course,on theDebtEliminatorprogram, or on the Debt Eliminator program plus $100, and how the DebtEliminator program plus $100 not only pays off the debts, but gives them$49,251insavingsattheendofsixyears.

The second chart gives amonth-by-month breakdown showing how eachdebt is systematically eliminated in thirty- four months using the $100accelerator.The formula isquite simple. In themonth followingpayoffof thefirst debt, theSamples add the amountof that payment to thepaymenton theseconddebt.Whentheseconddebtispaidoff,theyaddthecombinedpaymentstheyhavebeenmakingonthetworetireddebtstothepaymentsonthethirddebtuntilitispaidoff.Theycontinuetheprocess,keepingthecombinedtotalofallpaymentsat$1,120amonthuntilallthedebtsarepaidoffinMonth34.Thisiscalleddebt-paymentcompounding.

BeforetheSamplesstartedtheDebtEliminatorprogram,theyweretargetedtobeoutofdebtinsixyears,orseventy-twomonths.Whentheirdebtswerepaidoffinthethirty-fourthmonth,iftheycontinuepayingthe$1,120amonthforthirty-eightmonthstotheendoftheoriginalsix-yearperiodintoan8%growthfund,thecompoundedvalueofthosepaymentsattheendofthesix-yearperiodis$49,251.

Now, if you really want to get excited about what the Debt Eliminatorprogramcandoforyou,makealistofyourowndebtsontheDebtEliminatorWorksheet found in the Appendix. You’ll need to know payment amounts,numberofpaymentsremaining,interestrates,andapproximatebalances.Fillintheblanksthebestyoucan.Ifnecessary,callfinancialinstitutionsforadditionalinformation.

Oncealltheappropriatedebtinformationisrecordedinthefirsttable,gototheleft-handcolumnofthegraphintheAppendixandenterthemonthandyearfor sixty consecutive months, starting with the current month. Now, movinghorizontally across the top of the graph, write a name to describe each debt(VISA,pickup,homeequity,etc.).

Besuretorankthedebtsaccordingtothenumberofpaymentsremaining,startingwiththeonewiththefewestremainingpayments,nottheonewiththe

highestinterestrate.Thereasonforthisistogetintoasituationwhereyouaremakingdouble, triple,andquadruplepaymentsassoonaspossible.Thisgivesyou the feeling you are exterminating your debts with reckless abandon, awonderfulexperienceafteryearsoffeelingenslavedbythem.

Todeterminethemonthlypaymenttotalintheright-handcolumn,justaddup all payments on the debts you listed and add the $100 accelerator. Don’tworry about where the extra $100 will come from. Remember, the monthlypaymentamountintheright-handcolumnmustremainthesameasthedebtsareeliminated.

Now, start filling in thecolumns,one rowat a time, from left to right. Ifyoulistedthedebtsintherightorder,thedebtintheleftcolumnwillberetiredfirst.Whenyoufillinthenextrow,taketheamountyouhadbeenpayingontheretireddebt,andaddittothepaymentontheseconddebt.

Atthispoint,youneedtodoalittlecreativearithmetic.Becauseyouhaveincreased the amount of the secondpay-ment, youhave shortened thepayofftime. Divide the new payment into the approximate balance, plus someestimatedinteresttodeterminehowmanymonthsitwilltaketoretirethatdebt.Continuefillinginalltheblanks,arowatatime,untiltheseconddebtisretired.Thenadd thispayment to thepaymentof the thirddebt.Continue thisprocessuntilallofthedebtsareeliminated.

Mostpeople,when theyare finishedfilling in theblanks, think theyhavemadeamistake,becausetheamountoftimerequiredtogetoutofdebtismuchshorterthantheyfirstguessed.

Now,ifyouwanttogetmoreexcited,lookattheannuitytablebelowandfigurewhat yourmonthly payment amount from the right-hand columnof theworksheetwillbeworthinfive,ten,fifteen,twentyandtwenty-fiveyears,ifyoupaythatamountintoa8%investmentfundafterallyourdebtsarepaidoff.Seehowwonderfulitistohaveinterestworkingforyouinsteadofagainstyou?

Thepeoplewhounderstandmoneyspenditonassetsthat

generatewealth.Thosewhodon’tunderstandmoneyspenditonthingsthatconsumewealth,andthus

therichgetricherandthepoorgetpoorer.—BlaineHarris

TheFourthLaw

ThenexttimeIsawMary,Ihadbeentrackingmyexpensesforthreemonthsandlivingonlessthan90%ofmyincomefortwomonths.Ireadmygoalsheeteverynightandmorning,andthreeofmyfivecreditcardsandtheoverdraftdebtweregoneforever.

WhenIexplainedallthistoMary,shesaidIwasreadyforthefourthlaw.“Onceyouget out of debt,” she began, “Youdon’t just squander all that

newmoneyyouwillhavebynothavingtopayinterest.Youstartbuyingthingsthat appreciate in value. You never stop spending; you just spend differently,more wisely. You have to change. You need to become more inter- ested in

mutual funds than convertible sports cars from Italy. We live in a world ofmoney, butmanagingmoney can be as complicated and sophisticated as youwanttomakeit.There’smuchtolearn.”

“Sowhatisthefourthlaw?”Iasked,wantinghertosayitinafewwords.“First,let’splayalittlechess,”shesuggested.Ifollowedhertothe

chessboard.AseagerasIwastolearnthefourthlaw,Iwasmoreeagertoplaychess.Shehadwhippedmethreetimesinarow.Iwasdeterminedtoengineeradifferentoutcomethistime.

Sheseemedintentonphilosophizingonthefourthlaw.Good.IencouragedhertotalkaboutthatwhileIconcentratedonwinningthegame.

“AlbertEinsteinoncesaidoneofthemostpowerfulforcesintheuniversewascompoundinterest,”shesaid.

“Was that before or after he came up with the theory that laid thefoundationfortheinventionoftheatomicbomb?”Iasked.“Whatdoyouthinkhemeant?”

“Itmeans a 15-year-oldwho can start investing $35 amonth, and stickswith it, earning an 8% return, can reach retirement with an additional threequartersofamilliondollarsratherthanthe$35amonthjustslippingthroughthecracks,” she saidemphatically. “Itmeansayounghousewifewhopre-paresafewcheapmealsamonthsoshecansaltaway$50inagrowthmutualfund,ifshe sticks with it, can accumulate amillion dollars. It means Paul Smith canretirewithamilliondollarsifhecanliveon90%ofwhatheearns,andinvestthedifferencewisely.”

“Sowhat’sthefourthlaw?”Iasked,stillconcentratingonthegame.“Aboutfortyyearsago,”shecontinued,ignoringmyquestion,“afterIhad

masteredthefirstthreelaws,andhadsavedalittlemoneytoinvest,IthoughtI’dmakeakilling investing inporkbelly futures. Iguess Iwasshortonpatience,but I was still tracking and trimming. I wanted tomake a lot of money fast.Instead,Ilosttheentire$2,000Ihadworkedsohardtosave.Iwasdevastated.ItwaslikeIhadlostallthemoneyintheworld.IthoughtIwasgoingtohaveto

takeasecondjobtocovermylosses.”“Sowhatdidyoudo?”“Ijustcontinuedtrackingandtrimming,butthistimeIdidsomething

different.AsIwasbuildinganewnestegg,Istartedreadinginvestmentbooksandattendingseminars.Iwasn’tabouttolose$2,000thatfastasecondtime.AndIdidn’t.Todaymyinvestmentsearnmeover$2,000aday…”“Wow,”Isaid,notmeaningtointerrupther.Butthethoughtofsomeoneearning$2,000adaywhileputteringintheyardandplayingchesscouldn’thelpbuttriggeraverbalreactionfromme.

“Ilookatthat$2,000lossasthepriceIhadtopaytolearnthefourthlaw,ormytuition,”shesaid.“IfyoulistencloselytowhatIamsaying,youcanlearnthefourthlawforfree.”

“Sowhat’sthefourthlaw?”Idemanded.“I want you to attend a real estate seminar, and have a real estate

professionalshowyouatleastonepieceofpropertyaweek.”“Allmymoneyiscommittedtogettingoutofdebt,”Isaid.“Ican’tthink

aboutbuyingrealestate.”“Nobody said anything about buying, at least not yet. I alsowant you to

attend a stock, bond, and securities investment seminar, and read at least twobooksonthesubject.”

“Idon’thaveanymoneytoinvestinstockseither,”Isaid.“Butyouwill,soyoumustgetreadynow.IwantyoutoreadTheWallStreetJournalandMoneymagazine,subscribetoaninvestmentnewsletter,andfindacounselorormoneymanagerwhoismoreinterestedinalong-termrelationshipthanshort-termcommissions.”

“Whatisthefourthlaw?”Iasked,thinkingifIcouldstayonthistracktenmoreminutes,Imightwinthegame.

“Success happens when preparation meets opportunity. If you don’tprepare, you will never be able to seize those won- derful investmentopportunities that present themselves every day in the stock market and the

worldofrealestate.”“So the fourth law is preparation?” I asked, thinking I was about three

movesfromcheckmate.“I call it training, because training fits betterwith the other three laws—

tracking,targeting,andtrimming.Nowyouhaveitall.Ifyoucommityourselftotrack, target, trim,and train,youshouldneverwant for thematerial things inthisworld.NowtellmethethingsIaskedyoutodotodemonstrateyourtrainingproficiency.”

Icouldn’trememberanyofthemexceptthatIwassupposedtoreadTheWallStreetJournalandMoneymagazine.“MaybeIhadbettergetapieceofpaperandwritethemdown,”Isaid.“Wouldyousaythemagain.”

“Checkmate,”shesaidaftermakingherlastmove.Itriednottoshowmydisappointmentinlosingagain.Iborrowedapieceofpaperfromherdeskandwrotedownthethingsshewantedmetodotostartmyownmoneymanagementtrainingprogram.

Bythetimewemetagain,Ihadpaidoffallanddestroyedallbutoneofthechargecards,paidofftheoverdraftbalance,attendedtwoinvestmentseminars,readfourbooks,andlookedatsixpiecesofrealestate.IwasreadingTheWallStreetJournalatworkratherthanbuyingit,andwasreadingMoneymagazineatthelibraryonceamonth.

Maryassuredmewewerenotworkingonaquickfixformyfinancialworries.Norwerewetalkingaboutaget-rich-quickschemethatrequirednoeffortorrisk.Shesaidweweretalkingaboutchange—along-termchange—developingadifferentwaytolookatmoney,changingthewayIthoughtandactedinmoneymatters,settingfinancialgoalswithmoreemphasisondebtelimination,andsavingasopposedtogettingmorethings.“Mostofusneedtochangethewayweacquireandkeeptrackofourmoney,”sheexplained.“Mostofusneedtochangethewaywebudgetsowecanliveonlessthanweearn.Mostofusneedtochangethewaywespend,withmoreemphasisonbuyingthethingsthatincreaseinvalue.

“Manyofuscarryalotofemotionalbaggage,whichmakestheseattitudeandbehaviorchangesespeciallydifficult.We’veinheritedattitudesandbehaviorpatternsfromourparents.IfMomandDadkepttheirfinancialpapersinaboxunder the bed, we tend to do the same. If Mom grew up in the depressionwatchinghermotherhidemoneyinacoffeecan,shewillprobablydoittoo.IfDadboughtwhatevertoyhewantedusingthe“Ideservethis”rationale,thesonwillprobablybecomeaspendthrifttoo.”

***Ayoungmotherlearnedshehadinheritedherparents’hand-me-down

attitudesaboutmoney:“At thirteen, I was determined not to do the things my mother did that

irritatedme.NowI’mthirty-three,andIdon’twant topasson tomydaughterthethingIlikeleastaboutmylife—myfinancialsituation.

“Myhusband,Mark,workshardandisagoodfather,butwearen’tgettingalong. We have everything we want, just like my mom and dad. They hadeverythingbutpeaceofmind,andwe’reinthesameboat.

“Markwantstobudget.Soundsgruesometome.Weneedasolutionbeforethingsgetworse.We’resorightforeachother,andwegetalongsowell.Ifitweren’tforthemoneyproblems…

“Ijusthadtohaveitall,now,justlikeMomandDad.ButnowIwantsobadlytobe‘even’financially, thatIambuyinglottery

tickets.Ican’tpassthisontomydaughter.“Asa little girl, I cringedwhenmywardrobewas augmentedwithhand-

me-downs.ButnowIpunishmyselfbecause I’ve takenmyparents’hand-me-downfinancialbeliefsandallowedthemtohurtmeandmyfamily.”

It’stimetochange,ifwehaven’talready.Weliveinaworldthatrunsonmoney,sowemightaswelldevelopfinanciallyhealthyattitudesandbehaviorsthatwill enableus toprosper inaworldofmoney.Whetherwe like itornot,using money is something everyone has to do. We can use it foolishly andthoughtlesslyandbecomeslavestoit,orwecanuseitwisely,puttingittowork

forus,notonlysowecanenjoytheabundanceandprosperityoftheworld,butalsosowecanbemoreeffectiveinlighteningtheburdensofothers.

I knew a studentwhowrote on his application for admission to businessschoolthathewantedtolearnhowtoearnandmanagemoneysohewouldhavethefreedominhislifetodomanythingsthathadnothingtodowithmoney.

Thesadtruthisthatthosewhospurnmoney,andresistlearninghowtouseit,oftenendupspendingmoretimeworry-ingaboutitthanthosewhotookthetime early on to master the principles involved in acquiring, keeping, andmanagingmoney.

Itisnotthelackofmoney,buttheinabilitytomanagemoney,thatfillsourprisons. The inability to manage money pushes potentially fine, talented,intelligent people into crimes of theft, murder, prostitution, drugs, and evensuicide.Itmakespeopledothingstheyotherwisewouldneverdreamofdoing.

Thepeoplewhounderstandmoneyspenditonassetsthatgeneratewealth.Thosewhodon’tunderstandmoney,spenditonthingsthatconsumewealth,andthus the rich get richer and the poor get poorer. By following the principlesoutlinedinthisbook,youcanjointhe10%ofthepeoplewhoprovidethemoneyfortheother90%toborrow.

Likeinmostoflife’sendeavors,basicprinciplesareinvolvedingettingandkeepingmoney.Thoseprinciplescanbelearnedinbooks,classes,andseminars,from counselors and advisors, and in theworld of hard knocks. Some peopleclaimtheyhavemadeandlostseveralfortunesbefore theylearnedtopreservewealth.

Nobodyhastogobacktoschool,changecareers,orbuyaseatontheNewYorkStockExchange.Learningaboutmoneyislikedrivingacar.YoumaynotaspiretodriveintheIndy500,butifyouaretogetalonginthisworld,youmusthavesufficientskillwithacarandsufficientknowledgeoftrafficlawstogettoandfromworkandtobeabletonegotiateyourwaythroughabigcity,onandoffthefreeways.YoumaynotwanttoreadTheWallStreetJournaleveryday,orgotoM.B.A.school,butanyonecansubscribetoafinancialnewsletter,read

anoccasionalmoneymanagementbook,evenjoinaninvestmentclubthatmeetsonceortwiceamonth,orfindatrustedfinancialadvisor.

The basic principles involved in managing money are presented in thisbook.Track your daily expenses. Set targets. Live on less than you earn. Payyourselffirst.Getoutofdebt.Gettowhereyouarecollectinginterestinsteadofpayingit.But there ismuchmore to learn,especiallyafteryougetoutofdebtandarestartingtolookforplacestoputyourmoneytowork.

Forexample,oneofthemostdangerousfallaciesamongnoviceinvestorsisthat the rateof return isdirectly related to theamountof risk.Thegreater therisk, thegreater thepotential return.Sometimes this is true, butmany times itisn’t.

Suppose a marginal friend, who went through bankruptcy several yearsearlier,comestoyouandwantstoborrow$60,000.Ascollateral,heiswillingtoputupafree-and-clearpieceofcommercialrealestateinthecenterofyourtownthathejustinheritedfromtheestateofanaunt.Hehasarecentappraisalontheproperty showing its value at $875,000. He is so excited about this newinheritancethathewantstotakehiswifeonatriparoundtheworld.That’swhyhewants toborrowthe$60,000.Becauseof theembarrassmentofbankruptcy,andapotentialtimeproblem,hewouldrathergetthemoneyfromyouthanfromabank.Hewantstoleaveonthevacationinthenextfewdays.Heiswillingtopayyou18%interestontheloan.Hewillpayyoubackinafewmonths,afterhedecideswhathewantstodowiththeproperty.

Ifyouhadthecash,wouldyoumaketheloan?Ofcourse.Thenyouwouldfeelguiltyeverytimeyoufoundyourselfwishingyourfriendandhiswifewouldget sidetracked inBorneo and never return.Your risk is almost zero, and thereturn is five timeswhatyouaregettingonyour savings account at thebank.Highreturn,lowrisk.Onceinawhileanopportunitylikethiscomesalong.Butyou can never take advantage of such an opportunity unless you haveaccumulatedsomeliquidassets.

Successisdefinedastheplacewherepreparationmeetsopportunity.

Istheresuchathingasalow-return,high-riskinvestment?Sure.Supposetheboynextdoordecidestodropoutofschooltobecomea

rockstar.Heasksyoutoloanhim$60,000sohecanbuyanewelectricguitar,alizard-skinsuit,andavanwithcurtainsonthewindowssohecantakeyourdaughterwithhimtoLosAngelestomakehisfirstrecorddeal.Hesayshe’llpayyoua6%returnonyourinvestment,muchmorethanwhatyouareearninginthesavingsaccount.Lowreturn,highrisk.Andhe’smadwhenyousayno.

Supposeastockbrokergetsyouallexcitedaboutbuy-ingporkbelliesandothercommoditiesonmargin.Hesaysalittlebitofanupswingindemandcanliterallydoubleyourmoneyovernight.

Tired of the low return at the bank, you give him the nest egg you havebeenfeeding$300amonthfortenyears,hopingyouwilldoubleitsvalueinafewdays.Aweek later,whenyou call thebroker, he tells you that insteadoftaking a gentle upswing, the market took a gentle downswing. Then there issilenceonthephone.“Whatdoesthatmean?”youask.Then,inamatter-of-facttone,he tellsyouallyourmoney isgone.“You lost itall.Doyouwant to tryagain?”

Unfortunately,inschoolpeoplereceivemoretrainingonhowtodrivecarsthan how to handle money. Classes ought to be offered in “PersonalAccounting” (tracking), “Financial Strategies” (targeting), “Budget Reality”(trimming),“DebtManagementandElimination,”“AssetAccumulationI,II&III,” “Real Estate for Dummies,” “AssetManagement,” and “Protecting YourNestEgg”(training).Eachofthesesubjectheadingscouldbeafour-credit-hourcourse, just for starters. There’s plenty to learn, and if you’re serious aboutgettingcontrolofyourfinanciallife,acertainamountofyourtimeandresourcesshouldbeallocatedtoeducation.

Onedangerouspitfallfornewinvestors isplacingtoomuchvaluein“hottips.”Everyone shouldhave a trusted financial counselor.There are toomanypotentialpitfalls,andtoomuchatrisk,tomakemajorfinancialdecisionswithoutcounselyoucantrust.

If youmake your purchases based on “hot tips” you hear in the gym orcafeteria, you’ll probably do worse than 8%. Still, everyone should have atrustedfinancialcounselor.Therearetoomanypotentialpitfalls,andtoomuchatrisk,tomakemajorfinancialdecisionswithoutcounselyoucantrust.

Thefirsttimeyoureadthisbook,youmightgettheimpressionborrowingisbad.Notalways.Howmanystorieshaveyouheardaboutpeopleborrowingtheirwayintoanicehouseorabigpieceofland,onlytoseethevaluedoubleina few years, sometimes making hundreds of thousands of dollars for theborrower?

Borrowingforahomeisoneofthebestinvestmentsanyonecanmake,butinsteadofpayingitoffinthirtyyearswithtwo-thirdsofyourpaymentsgoingtointerest,savetensofthousandsofdollarsbypayingitoffintenorfifteenyears.

The young people who took out student loans twenty years ago so theycouldgotocollegeare,forthemostpart,financiallybetterofftodaythantheircounterpartswhowenttoworkoutofhighschool.AstudybytheGovernmentalCommission on Mental Illness and Health concluded that there is a closerelationshipbetweenyearsinschoolandthesenseofwell-beingandsatisfactioninlife.Theperspectivesofcollegegraduateswerebroaderandaspirationlevelshigher. When they worried, their worries tended to be over genuine, notimagined,troubles,butnogroupescapesstress.

It’sokaytoborrowforthingsthatincreaseinvalue.It’ssmarttoborrowtobuyapieceofrealestateyouthinkwilldoubleinvalueintwoorthreeyears.Itmay be smart to take out a $10,000 home improvement loan if the resultingimprovementsadd$20,000tothevalueofyourhome.It’sevensmartertoinvestinyourownfuturebygettingthebesteducationavailableinyourchosenfield.Whenpreparationandopportunitycometogether,theresultissuccess.

Borrowing for a car can be argued both ways. A car may depreciate invalue, but you need reliable transportation to make a living. Just remember,borrowingtobuyagoodusedcarsoyoucangettoandfromworkisn’tthesameasbuyinga$56,000BMWwitha5%downpayment.

There’saplaceineveryfinancialplanwhereyouforgetall thetalkaboutpositivethinking,anddevelopafailure-avoidancestrategy.Askyourself,“Howcan Imessup?”This iswhenyou realize that onemedical disaster in aweekcouldwipe out that $300 amonth you have been saving for ten years if youdon’t have adequate health insurance. This is when you realize that if yousuddenlydiedbeforethepensionfundwerefullyfunded,yourspousewouldn’thaveenoughtoliveonifyoudidn’thavelifeinsurance.“Whatif,whenIturnfifty, theydecide togivemy job to someonehalfmyage?Could I reduce thechanceofthathappeningwithmoretraining,orshouldIlookatstartingasmallbusinessonmyownbeforeI’mforcedtodoit?”

If you are paying more than 20% of your income in taxes (the averageworker making $50,000 with two children and a mortgage pays 30% of hisincomeindirectandindirecttaxes),youmightwanttostartlookingatsmall-orhome-businessopportunities.Abenefitofsuchabusinessmayproduceanother$8,000to$10,000inlegitimatetaxdeductions.

“If you are serious about preserving money, financial edu- cation andtrainingshouldbeanongoingpartofyourfinancialstrategy,”Maryadvisedasshewonanothergameofchess.

Training—thefourthlawoffinancialprosperity.

Wefirmlybelievethestrengthandprosperityofanationorsocietydependslargelyonthestrengthand

prosperityofitsfamilies.—BlaineHarris

TablesTurned

Aftermonthsoftracking,itwasautomatic,andwenolongermissedthethingswehadtrimmedoutofourbudget.IrememberedMarysayingthatwhileitmaybepossibletohaveanythingyouneed,youcan’thaveeverythingyouwant.

OneeveningwhenMaryandIgottogetherforchess,ItoldherthatwhenrealestateagentstriedtoqualifymebyaskinghowmuchmoneyIhadtoinvest,ItoldthemIhada$2millionlineofcredit.

“I guessyoudo,” she said. “As far as I amconcernedyouhave satisfiedyourpartoftheagreement.Howmuchofthe$2milliondoyouwant?”

“Maybewebetterdiscussitoveragameofchess,”Isuggested.Ididn’ttellher I had read a book titled Winning Chess Strategies along with all theinvestmentandrealestatebooks.

Whilewewereplaying, I toldherabout thedebts Judyand Ihad retired,and that we were now working on the home equity loan which was at 7%.ThankstoacoupleofnicerealestatecommissionsJudyhadreceived,wewereaheadofscheduleonourDebtEliminatorprogram.ItoldMarythatsincemyfirstmortgagewas6.5%,Ididn’treallyneedanyofthe8%moneyinthe$2millionlineofcredit.

“Are you telling me you don’t want my money, after all you’ve gonethroughtogetapproved?”Shesoundedsurprised,shocked,evenhurt.

“I’m not telling you I don’t want it. I just don’t need it now. My firstfinancialgoalistogetoutofdebt.WhywouldIwanttoincurmoredebt?WhywouldIwanttogodeeperindebtifIamontargettobeoutofdebtcompletelyinlessthanfouryears?”

“Maybeyou’llneedsomehelpgettingintoapieceofrealestatewhereyouthinkyoucandoubleyourmoney,”sheoffered.“Inthatevent,I’llbeknockingatyourdooraskingforsomeofthat8%money,”Isaid.ThenIhesitated,stoodup,andmotionedforhertostanduptoo.

“I’malreadysomuchindebttoyou,”IsaidasIputmyarmsaroundher.TearswerestreamingfrommyeyesasIkissedbothofhercheeks.“Thankyousomuch,”Isaid,finallypush-ingherbacksoIcouldlookintohertear-flooded

eyes.Shedidn’tsayanything,butIcouldtellfromhergentlesmilethatshewashappy.

WeresumedourgameasItoldherthestoryofthemanwhowaswalkingalong thebeachat low tide.Henoticed thousandsof starfish lyingon thewetsand,dyingintheheatofthenoondaysun.

“Howsad,”hethought,“thatthousandshavetodie.It’stoobadtherearesomany.Onemancannotsavethemall.”

Themancontinuedhiswalkdownthebeach,andsoonhepassedaveryoldbare-footedwomanwhowaspickingupstarfish,onebyone,andthrowingthembackintothesea.

“My dearwoman,” said the strollingman. “Why are you throwing thosestarfishback into thesea?Can’tyousee therearemany thousands?Youcan’tevenmakeadentinthenumberofstarfishthatwilldietoday.Whatdifferenceareyoureffortsgoingtomake?”

Theoldwomanpickedupanotherstarfishandthrewitintothesea,thenreplied,“It’sgoingtomakeadifferencetothatone.”

“That’sabeautifulstory,”Marysaid,“butwhyareyoutellingittome?”“BecauseI’mthestarfish;youarethewomanwhothrewmeintothesea,

andIwanttothankyoufordoingit.”“Ohyes,”Iadded.“Thereisonemorething.”“What?”sheasked.Ireacheddownandmovedmyqueen.“Checkmate,”Ismiled.

Oneofthemostpowerfulforcesintheuniverseiscompoundinterest.—AlbertEinstein

Interest

Maryprobablythoughtshewouldn’tseemeanymore,nowthatIdidn’tneedhermoney.Butshewaswrong.

She had opened a whole new world of opportunity for me, and I wasdeterminedtolearnallIcouldfromher.Wecontinuedtoplaychess,usuallytwoorthreetimesamonth.Usuallyshewon,butIwontoo,becauseIalwayscameawaywithsomenewideaorunderstandingthatwouldhelpmealongmywaytofinancialprosperity.Interestbecameoneofourfavoritetopicsofdiscussion.

Interestisaformidableopponent.Oncethegamestarts,heneverrests.Youmaywork50or60hoursaweektokeepupwithhim,butheworks168hoursaweektokeepaheadofyou.Henevertakesatimeoutorahalf-timebreak.

HeworkseverySunday,everyholiday,andeverynight.Hehasnomercy.Heeventakesyourmoneywhenyouaresickinbed.Andifyouloseyourjobandmisspayments,hewilltakeyourhouse.

If you have a $165,000mortgage on your home at 6.5%, you can go tosleepeverynightknowingoverthe30-yearmortgageyouwillaccrueonaveragejustunder$600permonthininterestorabout$20aday.Youpay$20whenyouspendChristmas day atGrandma’s.You pay another $20 every Saturday andSunday, even if you aren’t at work. When you signed the papers for that$165,000, 30-year mortgage, you agreed to pay $210,448 in interest. Addclosingcostsandoccasionallatefees,andyouwillpayforyourhouseabouttwoandahalftimesbythetimethemortgageispaid.

Everyone needs to know howmuch interest he or she is paying and beawareoftheoptionsavailabletodrasticallycutinterestpayments.Forexample,if you increased the payment on the above $165,000 mortgage by $390 permonth,lessthan100perweek,itwouldenableyoutopayitoffinfifteeninsteadof thirty years. Your total interest expense would be $94,272 instead of$210,448,asavingsof$116,176.That’salotofmoney,enoughtosupplementyourSocialSecuritycheckverynicelyafteryouretire.

And just thinkwhat that retirementwould be like if you continue to payyourselftheequivalentofthemortgagepay-ment,earningan8%return,forthe

additional fifteen years. Don’t forget, you have been living without thatmortgage payment in your lifestyle for the past fifteen years. Now is theopportunitytoreallybuildwealthforyouinsteadofforeveryoneelse.

Ifyoufinanceanexpensivecaroverfiveyearsyouwillpay thousands inadditionalinterest,evenifyouarefinancedataverylowratebecauseyouhaveagreatFICOscore.Andwhataboutthe18%youpayonVISAandMasterCard,unpaidmedical and dental bills, and so on? If you had a $5,000 bal- ance onyour VISA or MasterCard, and you paid the minimum payment of $125 amonth,itwouldtakeaboutfiveyearstopaythebalancedowntozero,assumingyou never used the card again. During that time you would have paid anadditional$2,693ininterest.

Ifyouaddupalltheinterestyouarepaying,includingyourmortgage,youcanbegintoseewhyyouarestrugglingfinancially,evenwithagoodjoboradoubleincome.Justthinkwhatyoucoulddoifyougottokeepallthatmoneyyouspendininteresteverymonth.Inmycase,eliminatingmyinterestpaymentswaslikegettinga$1,200amonthtax-freeraise.

I’m not suggesting that the bankers be hauled off to jail. If your bankerhelps youget into a fourplex apartmentwhere your rental income is $2,250 amonth, and your payment to the bank is $1,500 amonth, and you’ll own thething freeandclear in twelveyears, that’sagooddeal, andyouought togiveyourbankerahug.

Thegeneralguidelineforborrowing,endorsedbymostfinancialplanners,isthatyouborrowforthingsthatincreaseinvalueorproduceincome,neverforthingsthatdepreciate.

Borrowforbusinessandtobuyassetsthatincreaseinvalue,butpaycashforpleasure,comfort,andvanity.

Forthosewhospendtheirwayoutofdebt,interestcansuddenlybecomeawonderful teammate. Insteadofbeingaborrower,youarea lender. Insteadofbeing in the interest trap, interest isworking just ashard foryouas it used toworkagainstyou.Twenty-fourhoursaday, sevendaysaweek, it isearn- ing

moneyforyou.Itworksweekends,holidays,andnights.Itnevertakesadayoff.Itearnsjustasmuchforyouonthedayswhenyouaresickaswhenyouarewellandjustasmuchwhenyouareonvacationaswhenyouareworking.Thosewhodon’tunderstandinterest,payit.Thosewhounderstandit,collectit.

EvenwithallAlbertEinstein’sgreatsuccesses,hestillsaidoneofthemostpowerfulforcesintheuniversewascompoundinterest.

Apersonorcoupleearningalifetimeincomeof$2mil-lion(about$45,000a year), taking a 30-yearmortgage and always payingminimumpayments onbills,willpay$300,000to$400,000ininterest.

Overa45-yearworkingcareer,$200,000ininterestbreaksdowntoabout$370amonth.

Suppose you invested $370 amonth at 6% instead of paying it out. Theamount you’d end up with is $1,024,816 in the bank when you retire. Bycontinuing to earn 6%, you couldwithdraw$5,124 amonthduring retirementandneverreducetheprincipal.

Nowtrythisscenario.Ifyoucouldcomeupwithjustanother$30amonthandinvest$400amonthforyourentireworkinglife,andearnanaverageof9%interestonit,yournesteggwouldaddupto$2,984,166bythetimeyouretire,and you could draw out $22,381 a month for the rest of your life, withoutreducingprincipal.

As you make modest increases in your savings, the impact over yourlifetimewillbedramatic.Thepointisthatifyoucanjustchangethedirectionofyour interest stream so it’s coming in instead of going out, you will seewonderful,far-reachingchangesinyourfinanciallife.

Mary was helping me get out of the interest trap, helping me make thetransition from borrower to lender. And I was doing it without earningmoremoneyandcertainlywithoutrobbingabankorwinningthelottery.

Onereasonmostofusareborrowers insteadof lenders is thatweare tooeasilyseducedbyeasycreditplansthatmakeitpossibletohavethethingswewant now and not have to pay for them until later. Once we get on the

interest/installmenttreadmill,itseemsimpossibletogetoff.Sure,wecangetthethingswewantwithouthavingtopayupfront,but is itworth itwhenwefeelpoorallthetime?

Most of us can’t afford to pay for our home two and half times, butwehardlyhesitatesigningdocumentstomakesurewedojustthat.Whenweenterastoretobuysomethingwithan18%APRcreditcard,if theclerk,uponseeingthe card, automatically increased the price of the itemby50%,weprob- ablywouldn’tbuytheitem.Butthatisexactlythepricewearepaying,ifweaddtheinterestwewillpaybeforetheamountchargedtothecardhasbeenpaidoff.

Toomany people are already spendingmore than they earn eachmonth,using three or four credit cards or home equity lines of credit tomake up thedifference.Itisn’tunusualfortheoutstandingbalanceonthosecardstobeover$10,000,requiring$150amonthininterestpaymentsalone.

When we graduated from high school, most of us, including me, haddreamsofmakingasmuchaswedonowbutthoughtwewouldbeaffluentandhappyonthatmuchincome,nottrappedinafranticstrugglefromonepaycheckto the next. We wonder why we had fewer money problems when we wereearning a third ofwhatwe earn now.Worrying overmoney ismore likely tocause high blood pressure than salt.Moneyworries sap vitality and break upfamilies.Nothingrobsusofourself-esteemquickerthanbillswecan’tpay.

IfthepeopleinBangladeshknewhowmuchyouandIwereearning,theywouldcallusRockefellers.AcollegeprofessorwithaPh.D.inMongoliaearnstheequivalentofabout$250amonth.Percapitaincomeisonly$6,076USDperyearinChina,andtheymanagetosaveahigherpercentageoftheirincomethanAmericans do. We should count our blessings. Instead, we are franticallypaddlinga leakycanoe across anoceanof red ink, fearful that ifwe stop, thecanoewillsink.

Youmayearn$2.5millioninyourlifetime,butwhenyouretire,ifyou’relike the majority, you will have less than $25,000 in savings, enough to lastaboutsixmonthswhenyouareexpectedtoliveanotherseventeenyears.

Each of us must immediately undertake the responsibility to make thenecessaryadjustmentsandtrainourselves—andtheupcominggenerations—thatourcontinualsatisfactionofournever-endingspendingappetitethroughtheuseofcreditwillultimatelyproduceamostpainfulresult.

Wearenowlivingwiththegreatesttechnologicalandeconomicprosperitytheworldhaseverknown.Whileweenjoy thisgreatpowerandpotential,wemust adjust our balancewhile theopportunity to do so is still there.Wemustdevelopanabsoluteabhorrencetowasteandunnecessaryspending.

Sowhenarewegoingtolearnthateventhoughwecanhavejustaboutanythingweneed,wecan’thaveevery-thingwewant?Whenwillwestarttreatingourmoneyasapreciousresource?

Aninvestmentcounselorwassurprisedwhenanagingcouple,ninety-sevenandninety-eightyearsold,enteredhisofficetoseeaboutstartingpaymentsintoaretirementfund.“Whydidyouwaitsolong?”thecounselorasked.

“Couldn’tafforditwhilethechildrenwerealive,”theyresponded.Therealtragedyisthatmanyofthepeopleintheinter-estdebttrapdidn’t

gettherethroughignoranceandstupidity.MostoftheBabyBoomersgrewupinhomeswheretheyweretaught,oratleastobserved,soundfinancialpractices—paying off mortgages in years instead of decades, saving for rainy days,establishingsavingsaccountsforcollege,puttingmoneyawayforretirement.

If people know something about handling money, why don’t they do itbetter?And if they don’t know anything,whydon’t painful interest paymentsmotivate them to take the courses, buy the books, and listen to the tapes ongettingoutofdebtandachievingfinancialprosperity?

Everybodywantstobeoutofdebt.Everybodywouldrathercollectinterestthanpayinterest.TrytofindsomeonewhosaysheorsheisperfectlycontenttoretireonnothingmorethanSocialSecurity.Therearenosuchpeople.Thenwhyaremostofusheadedforaplacewherenoneofuswanttobe?

If the know-how is available on how to achieve financial security, whydon’t people do it? Why do we find it so hard to resist all the convincing

advertisingaimedatgettingustobuythingswecannotaffordanddon’treallyneed?Whyarewetemptedbythoseoffersforeasycreditagainandagain?Whywould we rather drive luxury sports cars now, than have $300,000 worth ofmutualfundswhenweretire?Arewereallythatshort-sighted?

HaveyoueverwatchedhungrychildrendigintobigpiecesofGermanchocolatecake?Onechildwilleatthecakefirstandsavethefrostinguntillast.Anotherchildwilleatthefrostingfirst,thenthecake.Someliketosavethebestuntillast.Otherseatthebestpartfirst.Adultsarethesameway.Ifyoubringhomeavideotowatchafterdinner,doyoucleanupthedinnerdishesbeforeyouwatchthevideoorafter?

We’retalkingaboutdelayedgratification,schedulingpainbeforepleasure,workbeforeplay,toilbeforerest.It’sthewayourparentsandgrandparentslivedduringthedepressionbecausebitterexperiencetaughtthemitwastheonlywayto survive. They had the old-fashioned belief that money should be earnedbeforeitcouldbespent.Theywereinagenerationwhereoneatethecakebeforethefrosting.Weliveinagenerationwheretoomanypeopleeatthefrostingfirst.

Webelieve thesalesmanwhenhesaysyoumightaswellput the itemonthe charge account so you can enjoy it while you are paying for it.What hedoesn’tsayisthatbybuyingoncredit,ifyouaddtheinteresttothecostoftheitem,youwillbepayingamuchhigherpricefortheitem.

Thebusinessmanwhoputsthehardtasksatthetopofhis“todo”listandattacksthemfirstaccomplishesmuchmoreinadaythanthepersonwhosavesthedifficult tasksuntil last.Usually,heor shenevergets to themoredifficulttasksand,unfortunately,theseareusuallythemostimportantitemsonanylist.Delayinggratificationistheprocessofschedulingthepainandpleasureinlifeinsuchawayastomakethepleasurebetterbyfacingthepainfirstandgettingitoverwith.

Peoplewouldrathergotomovies,playbasketball,goouttodinner,orjustputterinthegardenthanworkonfinances—paybills,balanceregisters,discussbudgeting and expenditure decisions. Such tasks are generally perceived as

unpleasant, even painful, and because attention to personal finances is notrequired by law, except at tax time, such matters are either postponed orneglectedaltogether.

Butifyoustopandthinkaboutit,thediscomfortassociatedinwrestlingwithfinancialproblemsnowisnothingcomparedtothepain,hurt,anddownrightmiseryassociatedwithforeclosure,bankruptcy,andfacingyearsofretirementwithnothingmorethanSocialSecurity.Withalittleeffortnow,youcanavoidalotofpainlater.

It’slikethechildwhoishavingsomuchfunplayingthathetriestoignorethegrowingdiscomfort inhisbladder.Heknowsit’s timeto interrupthisplayandgotothebathroom,buthe’shavingtoomuchfun.Hecontinuestopostponethe trip to thebathroomuntilwhatwouldhavebeenonlyaminor interruptionturnsintoamajorinconvenience,requiringhimtostopplayaltogetherbecausehehastogohometobatheandfindcleanclothes.

Ourinstantgratificationattitudewillultimatelyprovetobecatastrophic.Bylearningtosatisfyinstantgratificationdesireswithactionsthatcreatelong-termbenefits,wecanturncatastropheintorewardandachievement.

This book presents better andmore efficientways to handlemoney.Toomany people associate money management with unpleasant words likedeprivation,denial,cuttingback,belt-tightening,budgeting.Itisjustaseasytoassociate money management with pleasant words like spending, freedom,choices,dividends,peaceofmind,andaccomplishment.Itistimewechangetheway we look at money. Buying mutual funds can be almost as much fun asbuyingasportscar.

Just about everybody reaches the point in life where they realize theirincomeisaboutashighasitisevergoingtoget,andtheyarestillalongwayfromfeelingfinanciallysecure.

Thetruthis,youdon’thavetomakealotofmoneytobecomefinanciallysecure.Allyouneedisaprogramthatenablesyoutoredirectthewayyouspendthe incomealready inplace, to away thatgetsyououtofdebt andhelpsyou

accumulatesufficientassets to takecareofyouuntil thedayyoudie. If this iswhat youwant, following the principles presented in these pageswill get youthere.

Financialsecurityismoreabouthowyouspend,thanhowmuchmoneyyouearn.

—BlaineHarris

Spending

Ireviewedmytargetsonadailybasis,andwheneachpay-checkarrived,Ipaidmyselffirstbytaking10%offthetoptopaydownthedebtwiththelowestremainingbalance.

Oncewewereused to livingon90%ofmy income,wedidn’tevenmisstheother10%.Itdidn’tseemlikeverylongatalluntilthehomeequityloanwaspaidoff.Theonlyremainingdebtwasthemortgage.Makingdoublepaymentson the house and investing the rest made me feel like a victorious militarygeneralatahero’swelcome.

About this time, I surprisedMarybyannouncing that Iwanted towriteabookthatwouldcontainallthethingsshewasteachingme.IwassincerewhenItoldherthatotherpeopledeservedtheopportunitytoknowandunderstandthefour laws too, and I thought thebestway to sharewouldbe in thepagesof abook.

“Whatmakesyouthinkafurnituresalesmancanwriteabook?”sheasked.Her question didn’t catchme by surprise. I had been askingmyself the samethingforaboutamonth.

“YoushouldseethelovelettersIwritetoJudy,”Iteased.Webothlaughed.ThenIgotserious.“It’snotlikeI’mtryingtowritecirclesaroundMichael

CrichtonorscareStevenKingtodeath,”Isaid.“AllIwanttodoiswritedownthethingsIlearnedfromyousootherscanlearn.Ihadtodoalittlebitofwritingtograduatefromcollege.IgotA’sinsomeofmyEnglishclasses,andI’manavidreader.IbelieveIcandoit.TomClancysoldinsurancebeforehehitthebest-sellerlists.JohnGrishamwasalawyer.”

“Someday they’ll be saying Paul Smith was a furniture salesman,” sheadded.“Whatwillyoucallthebook?”

“SpendingYourWay toWealth,” I said, expressing the idea that creatingwealth is not somuch a function of budgeting and belt-tightening as it is theresult of spending differently, spending your money to get out of debt, andinvestinginassetsthatappreciate.

“Idon’tknowifIlikeit,”Marysaid.“Firstofall,itsoundstoomuchlikeSinningYourWaytoHeaven,orEatingYourWaytoThinness.”

Iremindedherthattherearedietsinwhichpeopleloseweightnotbyeatingless,butbyeatingdifferently.Theymakechangesinthekindsoffoodstheyeat—lessgravy,Frenchfries, icecream,andprimerib;morebroccoli,grapefruit,cottagecheese,sprouts,andfish.

Spending,likeeating,involvesaninfinitenumberofchoices.Athomeandat school we tend to spend a lot of time teaching fundamentals of music,athletics,mathematics, reading and other disciplines, butwe do not do a verygood job of teaching our children the basic spending principles needed forfinancialsurvivalinaworldofmoney.

“Almost anyonewith steady employment, regardless of income level anduponlearningcorrectspendingprinciples,canspendhisorherwayoutofdebtand achieve financial prosperity,” Mary said. “When you buy something ofvalue,youreceiveaninstructionmanualtellingyouhowtocareforthatproducttoinsuremaximumuseandlongevity.Buthaveyoueverheardofanemployergivingoutinstructionbookletswithpaychecks?”

ItoldMaryIalwayswonderedwhymypaychecknevercamewithasetofinstructions.Theprinciplestaughtinthisbookaretheinstructions.Thereaders

whofollowtheprincipleswillbeabletoachievedebt-freeprosperitywhiletheyarestillyoungenoughtoreallycelebrate.

“Maybewe can show a few people that the financial dreams they didn’tthinkwerepossible,”sheadded,“arereallywithintheirgrasp.”

“Afterreadingthebook,theywillhavethetoolstoachievethosedreams,”Iadded.

“Inmyyearsat the IRS, I sawsomegoodmoneymanagement,butmorebad money management,” Mary said. “A small number of families alwaysseemed to have money available for college educations, down payments forchildren’s homes, small businesses, and retirement, while most families withsimilarincomesalwaysseemedtobestrugglingjusttopaytheirbills,andneverseemed to bemore than sixty days away from bankruptcy. “A book like thisneeds tobewritten,” she added. “Ahandbook forpaychecks thatwould showeveryone,includingourchildren,inaverylogicalandconvincingway,howtogetorganizedfinancially,howtogetthemostoutofthemoneytheyearn,andhowtogetoutofdebtandbecomefinanciallysecureonanyincome.”

Themissionof thisbook is tohelppeopleachieveworthyfinancialgoalsbypresentingwell-conceived,easy-to-usemethodsfortrackingexpenses,settingtargets, trimmingexpenses, and trainingreaders in the art of spendingmoneywisely.Inthisbook,werevealandteachthetime-testedsecretsusedbynormalpeople,ateveryincomelevel,toachievedebt-freeprosperity.

Financial security is more a function of how you spend than how muchmoneyyouearn.

Toomanypeoplehavethefalsebeliefthatthesinglebiggestcauseoffinancialstressisearningtoolittlemoney.“IfIonlyearnedanother$500amonth,Iwouldn’thavetheseproblems.”

WhatwouldhappenifthePresidentoftheUnitedStates,duringareelectioncampaign,appearedontelevisiononenighttoannouncethat,inordertorelievethefinancialpressureonindividualsandfamilies,hewasorderingallcompanies,effectiveimmediately,togivetheiremployeesa10%across-the-

boardwageandsalaryincrease?Whatwouldbetheconsequenceofsuchanaction?Thepresidentwouldget

reelected, for sure; but in six months, would there be less financial stress inAmerica? No. Instead of using the extra 10% to pay off debts or increasesavings,mostpeoplewouldtaketheextramoneyandmakeadownpaymentona new Dodge truck or the boat they always wanted and increase their debtburdenevenmore.Thelackofmoneydoesn’tcauseasmuchfinancialstressasthelackofabilitytospendourmoneywisely.

Mary toldme thatyearsago,shehada friend inMontana.HisnamewasMike,andhewasbuildinganattractiveloghomeononeofthemostbeautifulhilltopsinthescenicBitterrootValley.Mikewasdebt-free,andhisonlyincomewasthehourlywageheearnedattheForestService.

“When I got out of school, I landeda good job and spent every penny,”Mikeexplained.“ButIwasn’thappy,soIdroppedoutandbecameahippie.Iearnednothingandlivedonnothing.Iwasn’thappylivingthatway,either.SoIgotanother job,butcontinued livingonnothing, likeduringmyhippiedays. Iwasdrivinga$150car,andmywifeboughtclothesatGoodwill.

“It wasn’t long until I was able to buy 10 acres of good land,” hecontinued. “Then I started building the house, paying cash for the buildingmaterials.Whenit isfinished,itwillbemine.IfI losemyjob,Iwon’tlosemyhouseandland.Infact,ifIlosemyjob,mylandwillprovideformyfamily.”

Hehadanorchard,alargegarden,chickens,andacow.Mikeworkedhard,butenjoyedfinancialpeaceofmind.

We know a lot of people who say they would like to trade places withMike.Whattheydon’tseemtounderstandiswhatMikehasiswithinthegraspof almost anyonewith a steady job, as long as theyunderstand they canhaveanythingtheyneed,butnoteverythingtheywant.“Anyfoolcangetmoney,butittakesawisemantokeepit,”Maryadded.

Ittakesmanagementanddiscipline,thekindyouhavebeenreadingaboutinthisbook.It’snotashardasyouthink.Helpisavailable.Theprinciplesare

simple.

1. Trackyourdailyexpenses.2. Targetrealisticfinancialgoals,writethemdown,andimprinttheminyourinternalcomputer.

3. Trimyourlivingexpensessoyouliveonlessthanyouearn,thenspendthedifferencetogetoutofdebtandbuyassetsthatappreciate.Payyourselffirst.

4. Trainyourselfinthepowerofcompoundinterest.Learninvest-mentstrategiesforstocks,securities,andrealestate.Developalong-termrelationshipwithafinancialadvisorandlivetheprinciplesthatgovernwealth.

Mary told me about a Vietnamese couple who arrived penniless in SanFrancisco in the mid-1980s. They obtained minimum-wage work in a donutshop.Beingwithoutanyfinancialresources,theywereallowedtostayinabackroom.Leftoverfoodwasprovidedtothem.

After several years, they had the opportunity to get an apartment. TheAmerican dreamwas finally within reach. But thinking it over, realizing thatwith the apartment they would have to pay utilities, buy a car, appliances,furniture, insurance, and groceries, they decided to stay in the back room andliveonleftoversfortwomoreyears.

When theyhadbeen in thecountry fiveyears, theybought the restaurantwheretheyhadbeenworking.Theypaid$30,000cash.Theyhadsaved80%ofthemoneytheyhadearned.Todaytheyownmanyrestaurants.

ToomanyAmericansspend104%oftheirincome,usingeasycredittogoalittle deeper in debt each month. Most American’s have less than $5,000 insavings.Worryingaboutmoneyisaleadingcauseofstress-relatedheartfailure.Fightingaboutmoneyistheleadingcauseofdivorce.

Everybodyseemssoconcernedaboutourpreciousnatural resources—air,

water, fossil fuels, rain forests, even whales and owls. But what about ourmoney?Isn’t itabout timewestarted treating itasapreciousresource?Ifyoudon’t,you’llwishyouhadifyouevergetapinkslipandhavenoreservetofallbackon,orwhenyougetthatgoldwatchandrealizeyou’llbefacingthegoldenyears in povertywhile your friends are spending theirwinters inArizona andFlorida.

Workingharder and longer is not the answer.Anew idea, a newwayofdoingbusinessisneeded.That’swhatthisbookisabout.

It doesn’tmatter if you are earning $20,000 a year and feel like you arepaddling a leaky canoe, or earning $200,000 a year and driving a sinkinghouseboat.Thefeeling is thesameifyoucan’tpayyourbillsandrealizeyouroceanofdebtisgettingdeeperanddeeper.Ifyoufeellikeyouneedafinancialmiracleanddon’tthinkyouaregoingtowinthelotteryanytimesoon,thisbookcanshowyouwhattodo.

Most people have a very simple system formanaging theirmoney.Theyputtheirpaycheckinthebank,paytherequiredbills,andtheyhopetherestlastsuntilthenextpaycheck.Ofcourse,itdoesn’t.Andwhenaskedwherethemoneywent, they respond inbroad, sweepinggeneralitiesbecause theyhavenoclearpictureofwhathappenedtothemoney.

Peopleseemtowanttoblameeveryoneelsefortheirfinancialwoes.“Myemployeristoocheaptopayadecentwage.”“ShoddygovernmentmanagementisruiningSocialSecurity.”“Greedylandlordschargetoomuchrent.”“TheIRSisstealingmymoney.”“IfAmericanmanufacturersweremoreconcernedwithquality thanprofit, Iwouldn’t have to spend somuchmoney replacingall thestuff that breaks—I wouldn’t be throwing away more dollars than people inIndialiveon.”

Whocanyoublamewhenyouturnsixty-fiveanddon’thaveenoughsaveduptogetthroughasingleyearofretirement?

Whocanyoublameifthedaughteryoulovesomuchwantstogetacollegeeducationandyoucan’taffordtohelpher?

Ifyoudon’tknowwhotoblameforyourfinancialwoes,lookinamirror.It doesn’t have to be this way. Responsible spending, regardless of your

incomelevel,canenableyoutogetthethingsyouneedandwant.The simple truth is that in the absence of a spending plan with clearly

definedgoalsandamethodoftrackingmoney,peoplewillspendwhatevertheyearn,sometimesmore,thankstoeasycredit.Thepersonearning$30,000ayearspendsitall.Thepersonearning$60,000ayearspendsitall.Thepersonearning$100,000ayearspendsitall.

The first step in getting control of your spending is to start tracking,keepingarecordofeverydollaryouspendonadailybasisandwritingitdown.

The next step is to set realistic targets. You can’t create a plan to gosomewhereifyoudon’tknowwhereyouwanttogo.

Next,youhavetotrimyourspendinghabitsso thatyou liveon less thanyouearn.Youdon’thavetodoliketheVietnamesecoupleandliveon20%ofearnings, but if you can liveon90%, if you are typical,wonderful things canhappeninyourlife.

If the$30,000-per-yearwageearner forceshimself to liveon$27,000,hewillhardlynoticethedifference.Likewise,the$60,000wageearnerwon’thavetogiveupmuchtoliveon$54,000,orthe$100,000persontoliveon$90,000.But they will all notice amazing changes in their financial problems. Theirmoney worries will decrease because they have money in the bank and theknowledge that they are progressing toward desirable financial goals—gettingoutofdebt,buildingaretire-mentannuity,savingfortheirdaughter’scollege,etc.

Andbecausetheydon’twanttosuffersetbacksthroughbadinvestments,theyareconstantlyreading,askingquestions,learning,anddevelopinghealthyfinancialhabits.Thiswecalltraining.

Itisentirelypossibleforalmostanyoneonanyincometolivedebt-freeandtocollectinterestinsteadofpayingit.

Inthemovie,Sabrina,starringHarrisonFord,theagingchauffeur,

Fairchild,surpriseshisdaughterwiththeannouncementthat,bystayinghomereadingbooksandmakingcarefulinvestmentsovertheyears,hehasaccumulatedover$2millionforher.

“Onlyinthemovies,”youmightsay.Notso.NewsreportsonpeoplelikeFairchild are almost commonplace, like the one about a retiring postalworkerwho had accumulated $4.2million in real estate investments. Just before thisbookwent topress, therewasapieceon televisionaboutacleaning ladywhodonated over half a million dollars to start a scholar- ship fund for needyAfrican-Americanwomen.

WhenAnne Schreiber died at age 101 in 1995,Moneymagazine ran anarticledescribinghowthisretiredIRSworkerhadturned$5,000insavingsintoa$22millionfortune,whichshelefttocharity.

Eatingissomethingwehavetodoeveryday.Wecanchoosetodoitwell,or we can choose to do it poorly. By repeat- ing poor habits daily, we candestroy things money cannot cure and we will pay for a lifetime. When weexercisethedisciplinetodoitwell,weenjoythebenefitsforalifetime.Moneyisnodifferent.Small,dailygoodhabitswoventhroughtheTrack,Target,Trim,andTrainprincipleswillreaprewardsforalifetime.

Spendingislikeeating.Wehavetodoiteveryday.Wecan’tstopspendinganymorethanwecanstopeating.Ifwespendright,wecanlivedebt-freewithsurplus money going into investment vehicles that pay for our children’seducations and allow us to retire in comfort. On the other hand, if we spendirresponsibly,wealwaysseemtobeadollarshort,worryingaboutmoney,andwithtoolittletoretireonwhenwecannolongerwork.

Aslongaswearegoingtospend,wemightaswelldoitright.Thisbookshowshowanyoneonanyincomecanspendtheirwaytodebt-freeprosperity.LikeMarymusthavesaidtomeahundredtimes,“Nowit’syourmove.”

Theabilitytocreatewealthisagift.

Impropermanagementofthegiftisingratitude.—BlaineHarris

MoreMoneytoManage

Paul,youaremasteringthefourlawsandhaveproventoyourselfthatthesefinancialprinciplesnotonlywork,butareessentialforfinancialsuccess.

“Forsomereason,”Marysaid,“mostpeoplebelievethatmanagingmoneyinbusinessissomehowmoreessentialthanmanagingthemoneythatflowsintoa household. Just the opposite is probablymore true, because if you learn torespect the value and power of properly managed money at home, you willprobablybemoreresponsiblewhenitcomestothegeneralwasteandmisuseofmoneyanywhere.

“Paul,youhavebeenagood student and Ihaveenjoyed sharing the fourmostpowerfulfinancialprinciplesinmylifewithyou.Youhavedemonstrated,once again, that anyone under virtually any condition can implement andimmediatelybenefitfromtheproperapplicationofthesefourlaws.”

Iwaspleasedwithmynewfoundfinancialconfidenceandwasanxioustolearneverythingaboutbuildingastrongnetworth.

“YouhavehintedtomethatyouhadsomethingelseyouwantedtosharewithmeonceIhaddemonstratedtoyouthatIwascommittedtomakingthelawsapartofmylife.Doyourememberwhatyouweregoingtosharewithme?”

“Yes,Iremember.Areyouready?”Iimmediatelyreplied,“Ifithasanythingtodowithmoneyormyabilityto

movemefasterandclosertomytargets,Iammorethanready.”Maryresponded,“Paul,unfortunatelymanypeoplehaveabusedwhatIam

abouttosharewithyou.Theyhavechasedtheillusionthatsimplyearningmore

moneywithoutasolidmanagementcommitmentwouldcreatefinancialstrength.Theyhavenevercompletelyunderstoodorperhapsneverbeen taughtproperlytheelementsof thekeyprinciplesyouhave learnedsowell. Iknowtheyhaveneverbeen taught inour schools at any level.At thevery least, theprinciplesshouldbetaughttoeveryseniorinhighschoolbeforetheworldof‘wants’putsthemonthewrongsideoffinancialpower.WhatIamabouttosharewithyouwasunderstoodsoclearlybyBenjaminFranklininthemid1700s.

“Doyouknow,Paul,whyBenjaminFranklinisonthe$100bill?”“No,I’veneverreallythoughtaboutit.”“He was the first self-made millionaire in the new republic. He truly

understood what he taught, because he achieved financial independence andinternational respect by applying this simple formula.He taught that there aretworulesthatmustbeappliedbyanyoneincreatingwealth.First,learnhowtomanagethemoneyyoualreadyhaveand,second,createmoremoneytomanage.

“Paul, you have already started making Mr. Franklin’s first requirementpartofyourdaily thoughtprocessandactions,so let’s takeafewminutesandtalkabouthissecond.

“Most people have never created a financial-priority plan and,consequently,donotknowhowpowerfulanextrafewhundreddollarsamonthreallyis.Sinceyouhavenowstoppedthefinancialleaksinyourpersonalaffairs,every new dollar you earn can be applied directly to achieving your highestpriori- ties. For example, if a 35-year-oldmade a commitment to put $300 amonth into a long-term mutual fund, averaging 10%, he would have nearly$1,000,000 in a retirement account at age70or$1,600,000 at age75.Now ifthatsame35-year-oldwouldearnenoughextramoneytoinvest$500amonth,hewould have $1,750,000 at age 70,whichwould give him over $100,000 ayearincomeat6%andhewouldneverhavetotouchtheprincipal.”

Additional incomedramaticallyaccelerates therealizationofeachofyourpriorities. Any emergency fund, college fund, vacation home, or retirement

accountgrowsrapidlywithundilutednewincomebeingapplieddirectlytothoseaccounts.BysimplyimplementingthepowerofBenFranklin’sfinancialadvice,manymillionaireshavebeencreated.Thesooneryoubegin,thelessitrequires.Thepowerofthecompoundingeffectofmoneyisastonishing.

“Paul there are many ways for either you or your wife or both of youtogethertocreatewhateverlevelofincomeisrequiredtomeetevenyourmostextravagantdreams,aslongasyoumaintainproperbalanceinyourfundamentalmanagementplan.

“Whileyouarelearningtomanageandmasterthesefourlaws,youmaybeintroduced to ideas and concepts that can produce for you dramatically moremoneytomanage.Youcancreatemoremoneyandatthesametimeimplementeverythingyouhavebeentaughtinordertotakefulladvantageofthepowerofthatnewmoney.Theselawswillguideyouasadditionalincomeflowsintoyourcontrol, directing each dollar to its highest and most effective use. Properlyapplied,theselawswillcreateevenmoreexcitementandenergyandwillsustainyouonyourpathwaytocompletefinancialindependence.

“Nowthatyouunderstandthecompoundingeffectofadditionalincome,whichcancomeinmanyforms,accompaniedbyadeterminedcommitmenttofinancialmanagement,letmeteachyouonemoreprinciplecalledregeneratingincome.Whenincomeistieddirectlytolabor,incomestopswhenlaborstops.Whenlaborcreatesincomethatrepeatsitself,independentofadditionallabor,youwillhavecreatedthemostidealformofincome.

“Asyougeneratenewincome,youwillgetarealandsustainedrushasyousee it go towork generating evenmore incomewhile you are asleep or evenwhen you’re at the ball game.The yield you get from putting yourmoney toworkbegins thepowerful compoundingeffect ofmoneyearningmoney.Withregeneratingincome,younotonlygetthebenefitofyourmoneymakingmoneyforyou,butnowthelaboryouhaveinvestedtoproduceincomeiscompoundingon its own and is also makingmoney for you. As this compounding incomebeginstogrowandastoundyou,resisttheurgetowasteandspendfrivolously.

Instead, allow the fruits of your labor to grow, providing peace-of-mind,security,freedom,andchoicesforyou,yourfamily,andothers.

“Whateveryoudonow,alwaysbewilling tosharewithanyonewhatyouhavelearned,asfreelyasIhavewithyou.Youwillfindthemoreyoushare,thebetteryouwillfeel,andthebetteryoufeel,themoreenergyyouwillgeneratetoimplementyourownpersonalpathtoprosperity.

“Godspeed,myfriend.Don’tforgettoshare.”

Learningthedisciplinesnecessarytomanagesmallamounts

ofmoneyisthesecrettotheaccumulationandmanagementoflargeamountsofmoney.

—BlaineHarris

The4Laws

I‘llneverforgetmylastconversationwithMary.Shewashavingseriousheartproblems,whichweremakingitincreasinglydifficultforhertolivebyherself.ShehaddecidedtomovetoOklahomaCitytolivewithherdaughter.

“Thisisyourlastchanceifyouwantanyofthat$2million,”shesaidinateasingvoice.ButIknewshewasn’tteasing.IfIwantedtoborrowallorpartofthatmoney,Ihadnodoubtsaboutherwillingnesstogiveittome.

“I’mgoingtomissyou,”Isaid.“You’lldojustfine.You’velearnedyourlessonswell.Nowthatyoucan’t

spendsomuchtimeplayingchesswithme,maybeyou’llfinishthebook.”“Ihaveaseriousconcernaboutthebook,”Isaid,movingovertothesofa

andarrangingthepawnsontheboard.“Tellmeaboutit.”

“Abookcan’treplaceMarySessions,”Isaid.“Whatisthatsupposedtomean?”“Icouldneverhavegottencontrolofmyfinanciallifewithoutyourhelp.”“Iknow,”shesaid,confidently.“Theregularmeetings,goingovertheworksheets,makingcommitments,

reportingback—abookcan’tdothosekindsofthings.ForthereaderstobenefitasIhave,theyneedaMarySessions.”

“You’renotsuggestingthatIletyouputmynameandphonenumberinthebackofyourbooksotenthousandpeoplewillcallme,askingfora$2millionlineofcredit?”sheasked.

“No.I’mjustafraidthatifthereadersdon’thaveaMarySessions,theywon’tbeabletodowhatIdid.”

“Theprinciplesarethesame,whethertheyreadtheminabookorhearthemwhileplayingchesswithme,”sheargued.

Ihadtoagree.“But,”Iinsisted,“oncetheprinciplesaremastered,thekeytoapplyingthemisconsistency.”

Howmanytimeshaveyoubeenexcitedaboutanewdiet,orexerciseprogram,orlearninganewsportorskill?Youmakeacommitmenttodoiteveryday—onlytobedistractedafewweeksdowntheroad.Yourememberamonthlaterthatyouarenolongerdoingwhatyoudecidedtodo.

IfyougetintoaDebtEliminatorprogramtobefreeofdebtinthreeyears,andyousetasideanextra$200amonthforaccelerateddebtpayments,ifyouforgettodoitinthefourthandfifthmonths,howsuccessfulwillyoubeingettingoutofdebt?

Marysaidthattheconsistencyweseeinsportsisthesamekindrequiredtobesuccessfulinanyfinancialmanagementplan.Shesaidthepowerofcompoundinterestreachesatomicproportionswhenaplayerisconsistent,notjustmonthaftermonthandyearafteryear,butdecadeupondecade.

CalvinCoolidgesaid,“Nothingintheworldcantaketheplaceofpersistence.Talentwillnot;nothingismorecommonthanunsuccessfulmen

withtalent.Geniuswillnot;unrewardedgeniusisalmostaproverb.Educationwillnot;theworldisfullofeducatedderelicts.Persistenceanddeterminationaloneareomnipotent.Theslogan‘presson’hassolved,andalwayswillsolvetheproblemsofthehumanrace.”

Ifthemarketcontinuedtoreturnitshistoricalaverageof10%,a15-year-oldcanaccumulateamilliondollarsbyretirementbysaving$35amonth.A13-year-oldcanamass$2millionbyretirementbyputtingaway$2aday.

Ifeveryteenagerwererequiredtoreadthisbook,somewouldstartsavingsprograms.Butforeveryhundredthatdid,aftersixmonths,onlytwoorthreewouldstillbedoingit.Itishumannaturetoslipbackintoold,sometimesfatal,habits.

Marysaidthebestwaytoensureconsistencyinstayingonafinancialpathtoprosperityistofocusyourenergy,yourthinking,andyouractionsontherewardofwhat’smostimportanttoyou.Lifeistobeenjoyed.Thefallacyisthattheonlywaytoenjoyitistospend,spend,andspend.Giveyourselfachancetofeelthesuccessofbeingincontrolofyourmoneyratherthanbeingcontrolledbyit.Onesuccessleadstoanotherandbeforeyouknowit,youwillbeenjoyingnotonlythefinancialrewards,butalsotheemotionalrewardsofriddingyourlifeofunnecessarystressandbaggageduetofinancialmismanagement.Onceyouhaveexperiencedtheexhilarationofbeingaleaderinthefinancialgameoflife,youwillnevergobacktobeingontheothersideofthecoin!

Thedisciplinenecessarytoachievesuccessinanythinginlifeisnotdifficultbecauseitisaby-productoftargetstowhichoneispassionatelycommittedto.Behaviormodifiesitselftoaccomplishthethingthatismostpassionatelyandurgentlyonthemind.Don’ttradewhatyouwantmostinlifeforwhatyouwantrightnow.Keepyoureyefocusedonyourhighestpriorities.

Marycontinued,“Privateindividualscannowreceiveinstantfeedbackandclearlydefinedpathwaystakingthemstepbystepfromwheretheyaretodaytowheretheymostdesiretobe.TheinteractiveWebapplicationTheFinancialWellnessGrouphascreatedisspecificallydesignedtoimplementeachofthe

fourlawsandassistyouonyourpathtosuccess,”Marysaid.“Andbytheway,Checkmate!”“DidyousayCheckmate?”Paulreplied.“Yes,you’veheardmesaythatalmosteverytimewe’veplayedchess,”she

smiled.“Remember,life,likethegameofchess,requiresustothinkseveralmoves

aheadandplanourstrategytoultimatelyputusincontrol.”Ihadtolaugh,thinkinghowironicitwasthatMaryalwaysseemedtofind

awaytowinourchessgames,andintheprocess,shepositionedmetowinamuchbiggergame!

The4Laws—positioningyoutowinthefinancialgameoflife.

TheFinancialWellnessChallenge

Wechallengeeachofyoutomakeadifference.Weareeachonthechessboardoflife.Wemustassumetheresponsibilityforourselvesandthosewhodependonus,andmakethemournumber-onepriorityinlife.Wemustthenmanageouractivitywithabsoluteintensity,whichmustdriveeverymovewemakeinordertoachieveself-relianceandcompletefinancialindependence.

Wechallengeyoutospendthenextlittlewhiledoingwhatmostpeoplewon’t,soyoucanspendtherestofyourlifedoingwhatmostpeoplecan’t.

Thenextmoveisyours…

Authors’FinalThoughts

Withthisfinalchapter,wefeelimpressedtoremindyouofacoupleofoverallthoughtsasyoutakewhatyouhavebeentaughtandwitnessforyourselfaremarkabletransformationinyourabilitytomasterthepowerofmoney.

Weliketothinkofthisbook—alongwiththeimplementinginfluenceandreal-timeeffectivenessofTheMoneyPlanner®Onlineservice,ouronlineWebapplication—as a “CashCoach” or “Cash Coach in a Can.” It doesn’tmatterwhetheryouhavejustboughtthefinestsetofgolfclubsavail-ableorownthemostefficientkitchenknowntoman,ifyoudon’tusethemwithsomedegreeofcommitmenttoimprove,ithasbeenfornaught.

Transmittingcoachingenergyanddeepbelievabilityintoscriptisdifficultatbest.Thesepageswerewrittentomakebadmoneymanagersgoodandgoodmoneymanagersbetter.ThepowerofPriorityThinking™isjustbeginningtobeunderstoodbythegreatteachersandcoachesoftheworld.Weknowthatwhenthemindcanselectwithoutundueoutsidepressure tochooseandcanbegintovisualize the emotion and feeling associated with fulfillment, then behaviorconforms, as it must, to the overpowering influence that comes from clearprioritythought.

Paul has just started to master the power of the four laws of prioritythinking and you have just been given an eagle’s view of the most exciting,peaceful,andstimulatingnewprinciples, thatwill separateyou fromthoseoldandunproductivethoughtsandhabits.

If youhave arrived at this newpoint in your lifewith a greater desire tobecome financially free from your past limitations, you will witness theunveilingofgreat financial truths tocreatewealth.The influenceof the fourthlaw,“Training,”isjustabouttoberevealed.Yourpriority-thoughtprocesswillselectively drive your behavior to fulfillment and lead you to stimulating andaccomplishedsuccessfulpeoplewhowillcontinuetotrainyouandmotivateyouto realize the great priorities of your life. You will be given opportunities tocreate new wealth, which you must embrace with great commitment anddedication. More money will become avail- able to you through the priority

process that youmust, at all costs, cause to conform to the power of the fourlaws,whichhavejustbeenrevealedtoyou.

Learnnowwithexcitement,asyoucauseyourselfandthoseaboutyou tobecome more proficient as your money, talents, and assets respond to theprioritiesofyourlife.Moneywillrespondtoyourcommandmuchlikeanimalstothegreatestoftrainers.

Thankyou foryourenthusiasm to learnand toprogress.Greatprosperityandpeaceofmindwillnowbeyours.Thenextmoveisyours!

AbouttheAuthors…

BlaineHarrishasspentmostofhislifecreating,managing,andconsultingwithbusinesses.HehasservedastheCEOandchairmanoftheboardofmanyprivateandpubliccorporations,bothnationallyandinternationally.

Blaine’sgreatestthrillinbusinesscomesfromtheassociationwithmenandwomenwho are passionately committed to the purpose of the business.He isenergizedasheshareshisvisionofbusinessandsuccesstothosewhoareeagertolearnandimprove.Havinggrownupinaconstructionfamily,hehasowned,developed, and managed apartments, warehouses, shopping centers,condominiums, and subdivisions. He was the cofounder and past CEO andchairman of the board of an international business which became Inc.Magazine’shighest-performingfranchiseoftheyear.

Blaine’s faith in God, his family, country, and business are his greatestloves.Helovesanyoutdoorsport.Hispersonalpreferenceisridingmotorcycles.HecurrentlyisacontributingmemberofTheFinancialWellnessGroup,whosemissionitistoimprovethequalityoflifeofindividualsandfamiliesthroughthemanagement of money and the implementation of fundamentally simpleprinciplesoftruthbasictosuccesseverywhere.

CharlesCoonradt,chairmanandCEOofTheGameofWork,Inc.,isinternationallyrecognizedinthefieldsofproductivityandprofitabilityimprovementasanauthor,consultant,andspeaker.

Chuck’sbooksTheGameofWorkandManaging theObvioushave beenlabeled themost original anduseful tools for business to come along since InSearchofExcellence.He is a contributing author to theChicken Soup for theSoulseries.

Chuck’sclientsincludePepsiCo,FlemingCompanies,MarkerBindings,HoechstCelanese,RalstonPurina,Browning-FerrisIndustries,andmanyotherFortune500firms.OveronemillionmanagersandsupervisorshaveheardChuck’suniquemessage.HeliveswithhiswifeandchildreninParkCity,Utah.

Appendix

Chartsassociatedwiththe“Debt-Free”chapter.ItemizedDebts

IfyouwouldliketoprocessyourcustomDebtEliminatorprogramonline,visitwww.thefinancialwellnessgroup.comand enroll for TheMoney Planner onlinesystem. You can also call to order at (801) 296-6300. You can use the Debt

EliminatorInputSheettoorganizeyourdebtinformationforinput.DebtEliminatorWorksheet

DEBTELIMINATORINPUTSHEET

AboutFranklinCovey

(Co-publisherofThe4LawsofFinancialProsperity)

At FranklinCovey, our mission is to enable greatness in people andorganizations everywhere. We believe the out- comes of great organizationsinclude:

Achievingsustainedsuperiorfinancialperformance.Creatingintenselyloyalcustomers.Developingawinningorganizationalculture.Makingadistinctivecontribution.

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Franklin Covey Co. (NYSE:FC)(NYSE: FC) is a global companyspecializinginperformanceimprovement.Wehelporganizationsachieveresultsthat require a change in human behavior. Our expertise is in seven areas:leadership, execution, productivity, trust, sales performance, customer loyaltyandeducation.FranklinCoveyclientshave included90percentof theFortune100,morethan75percentoftheFortune500,thousandsofsmall-andmid-sizedbusinesses,aswellasnumerousgovernmententitiesandeducationalinstitutions.Franklin Covey has more than 40 direct and licensee offices providingprofessional services in over 140 countries. For more information, visitwww.franklincovey.com

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AboutTheFinancial

WellnessGroup™

OurmissionatTheFinancialWellnessGroupistohelpindividualsandfamiliestakecontroloftheirmoneyandbuildfinancialprosperity.Formorethanadecadewehavebeentrainingandprovidingfinancialwellnesssolutionstoindividuals,families,groups,companiesanduniversitiesbasedonourproprietary“4Laws”principles.Theseprinciplesbreakthecomplexityofmoneyintofourpowerful,yeteasytoimplementstepsthatanyonecanlearn,remember,andimplement.Thesesimplestepsleadto:

Reducedfinancialstress.Eliminationofdebt.Increasedsavingsandinvestments.Achievementoffinancialgoals.Greaterfinancialsecurityandstrength.

ImplementWhatYouHaveLearned

WehavecreatedTheMoneyPlanneronlinesystemtoputintopracticewhatyouhavejustread.Withthesystemyouwill:

Createapersonalizedspendingplan.Manageandmonitorspending.BuildacustomDebtEliminatorprogram.Identifyfinancialgoalsandaclearpathtoachievement.Buildhealthymoney-savinghabits.

Tolearnmoreabouthowyouortheclientsyouservecanbenefitfromourproducts,training,andservices,visitusatwww.thefinancialwellnessgroup.comorcallusat(801)296-6300.

TheNextMoveIsYours!