How to Become a Little Richer

Most of us want to be in the happy state of knowing each night as we drift off to sleep that we are a little bit richer than we were when we woke up that morning। Can you relate to that desire? Of course, you can. After all, the importance of money in our interconnected world grows each day. Yet, I still believe that if you hope to live a happy, balanced life, you'll be smart enough to consider that wealth is only an instrument to be used, not a god to be worshipped.

So, if you wish to sustain balance in your life, retain a sense of deep joy, and successfully grow richer and richer over time। Focus on enhancing two personal quantities: your cash flow surplus and your net worth. Strengthening the first will automatically beef up of the second.

The way to ensure that you grow a little bit richer each day is to focus on your cash flow patterns over just one day, then over one week, later over one month, and so on. If within each time segment you always make it a point to spend less than you bring in on a net basis (after tax and other standard deductions) then you will be transforming the unutilized portion of your net earnings into a personal store of capital; and you will be acting as a capitalist in the finest sense of the word!
Possessing a growing store of capital will empower you to further load up your net worth statement with fruitful or productive assets like bank savings, money market funds, bond funds, equity funds, property funds, rental-yielding properties, dividend-yielding stocks, and the like। In essence, you will be choosing to exercise deferred gratification by giving up a portion of your capacity to consume today for the opportunity to possess far more (and to enjoy a lot more) tomorrow.

It is important to realize that a net worth statement has two parts, as does a cash flow statement. The net worth statement's twin components are assets and liabilities. In general, it is tempting to utter clichés and say that assets are good and liabilities are bad. However, that would be an excessive generalization. Let me explain:
Assets can either be appreciating or depreciating ones। Obviously, appreciating assets like growing bank deposits, investment funds, appreciating properties, and high quality stocks are good. Depreciating assets, on the other hand, lose value over time. These may include your cars, computers and mobile phones. The wise course is not to avoid owning depreciating assets but rather to ensure you have much more in appreciating assets.

Liabilities also can be good or bad. Good forms of debt might include well-structured mortgages on second or third pieces of property that you earn rental from. Bad types of liabilities most certainly include all unpaid, regularly carried over credit card debt and loans.
It is a tremendous eye-opener to understand that unpaid credit card or loan balances are dreadful liabilities for regular people like you and me to have, but are wonderful assets for the banks and lending investors!

So ask yourself if your goal in life is to sacrifice your personal long-term financial health to bolster the bottomline of some faceless financial institution, or is it to manage your money wisely to ensure you grow a little richer everyday? As Confucius said: When prosperity comes, do not use all of it.

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Buffering Up Your Safety Zone

Money doesn't grow on trees. There's never enough money. You have to sacrifice or work hard for money. Money is the root of all evil. Whew! Such clichés about money make you squirm? Well, money isn’t really the most essential thing in life, but it’s practically close to oxygen on the ‘gotta have it’ scale.

Have you ever been to the circus and watched aerial acrobats perform their live routines on a high wire act? Then, you should also have noticed, at least momentarily, that the safety net strung out directly below the trapeze artists serves a critically important function! Likewise, to thrive in our financial lives, we too need a 'safety net'.

More specifically, I urge you to establish a reserve fund for 3 - 12 months' regular expenses. This reserve fund or cash buffer or economic safety net shall serve as an emergency buffer fund. Its fundamental purpose is to provide both fiscal certainty and emotional stability.
Do whatever you must to develop a certainty about money, a certainty that you deserve money and that money will be a resource to assist you in your contingencies and in the accomplishment of your goals. There is one key secret known by all of the world's money masters: money by itself has no power whatsoever. The power or energy of money lies in our attitudes, beliefs and control about it. And this is true for you.

Manage Your Money and Manage Your Life

Money management suggests pulling off greater control over cash flow, both in personal and business perspective. It is the process of budgeting, saving, investing, spending and/or overseeing the cash handling of an individual or group. Effective money management can be achieved by establishing budgets and analyzing costs and income. A relatively second-rate investment can roll into a dynamic gold mine through effective handling of financial assets. What percentage or what part of your wealth should be put into risk in order to maximize your utility function? Controlling risk by proclaiming the amount of closing-out loss is different from directing risk through a money management model that determines the extent of your problem. You do not have to save your entire paycheck, but you should save at least a little something out of it. You must use a method to trace where every single dollar goes. Only when you know where your money is going, can you take steps to channel it to your savings and investments.

Financial management gives practical advice for gambling, for business contingencies, and for stock trading/buying or selling stock shares. Deficient money management is one major cause of bankruptcy among unseasoned traders. Only when you develop the habit of managing your personal finances, can you manage the finances of your own business. So many people financially mismanage their businesses into bankruptcy because they mismanage their own finances. Don't be one of them! It may take some time to change your habits and actions, but it will pay well in the long run if you do. If you want to be wealthy, do not expect it to happen automatically. You must commit to spend time on your finances. Millionaires spend an average of an hour a day on personal wealth management, while most people spend less than an hour a month, usually on paying bills. Financial stress resulting from poor money management skills can affect our capacity to make good decisions, harm our relationships, affect physical and mental health, and ultimately to function well in life. Many people think that if you cannot manage your life, you can't begin to manage your money.

On Borrowing – A Curse or A Blessing?

Consumer borrowing has convincingly muscled itself into the 21^st century’s global retail economy. Borrowing money has leveled up its stature as a safe and easy, natural, respectable, time-honored tradition for financing business operating capital, expansion, the purchase of equipment, building up inventory, and to even-out cash flow. In fact, it is the most logical means of financing business and business operations nowadays and it seems that it is no longer feasible to live and stay out of debt. Yet there are those who have remained debt-free and still, many people assume that all debt is bad... even categorically evil. Is it desirable to totally eschew or abstain from debt? Is it realistic to extricate oneself from the clutches of clinging debt! Is debt a curse or a blessing?

Debt is one of the few things in life that cannot be appropriately viewed in black and white! It should be viewed in the full spectrum of color and hue. Just like water, debt can be a great ally if properly harnessed. But it can scratch you for life or even permanently bump off your breath if it is allowed to rant and rave out of control. Typical consumer loans are taken on for years at a stretch to buy items that plunge in value, at times suddenly during the term of the outstanding loan! But too much consumer debt indicates a well-entrenched helplessness to exercise one of the key criteria for long-term success, a commitment to deferred gratification - the willingness to give up something good today in anticipation of something far better tomorrow. This philosophy of deferred gratification points to a person’s superior emotional aptitude. Mature people can exercise deferred gratification with regard to consumer items. Immature people can't, won't or simply don't! And the dividing line often has little to do with chronological age.

On the other hand, a viable business debt - under the right circumstances - can be productive. Money may be borrowed, say at 12%, to engage in productive economic activities that yield perhaps 25% or more. The ability to do this continually leads to burgeoning, upward spiraling profits, which are the cornerstone of sound, vibrant capitalism and the goal of all self-respecting capitalists. However, this could be construed as greed; and unadulterated self-indulgence is cancerously evil. But a healthy desire for profits, as long as it is attained by ethical business practices devoid of scraping others, is not only good, but wonderful. After all, the fair exchange of useful commodities and services for money is the foundation of a vigorous economy. Modern life is centered upon the benefits of profits earned honestly and shared benevolently.

Still, in a viable business borrowing, intelligent restraint should be used. Business owners and managers must use extreme caution regarding borrowing to start new ventures, to maintain cash flow and operations capital in existing businesses, or for expansion. One should try to identify which financial debts are productive, good business-type ones, and which ones are the more common destructive, consumption-type that only make financial institutions richer at your expense! Then embark upon a focused program of debt-eradication within the second group. Either pay off debts in order of the most expensive ones (meaning those with the highest interest rates) first; or pay them off in order of the smallest ones first.The first strategy is mathematically more efficient, but the second is more emotionally fulfilling. Go for the first if you're well-disciplined. Use the second if you're like most of us mere mortals and in need of quick reinforcement through positive feedback! Try your best in crushing the monster of excessive consumer debt and thus rescuing your future income streams from being devoured by this implacable foe. Will you be an intelligent borrower or economic slave?

Are We Happier When We Have More Money?

Many of us think that more money leads to greater happiness and contentment. As a matter of fact, almost everyone works for money and our job accomplishments are measured in terms of monetary returns. Thus, it seems that in our consumerist society, people are compelled to follow the tenet that luxury is the status symbol of success and prominence. More money means finer cars and houses. The possession of material wealth implies the prospect of more holidays, travel to exotic places and quality entertainment. Lavish consumption somehow pervades as the goal of our economy. Would you deny the fact that having more money enables you and your family to survive the unforeseen financially draining events such as serious illnesses and disasters? And who is in a better position to help the less fortunate? Obviously, these rationalizations account to the pervasive notion that more money brings happiness.

Now, let’s look into some research findings so we can really spot the score:

• Factors predicting the subjective well-being of nations In the Journal of Personality and Social Psychology (1995) indicated that while there is a strong relationship between income and satisfaction at the lower income levels, the relationship becomes insignificant at the higher income level. This suggests that once the income rises above the poverty level, further increase in income does not increase happiness level by any significant level. This also suggests that people in rich nations may not be happier than those in poorer nations. Correlates of financial success as a life aspiration showed that the more a person values money, the less satisfied he will be when he gets it. This suggests that in order to be happy, we need to value money less.
• Using a battery of statistical data from a variety of sources including UNESCO, the CIA, The New Economics Foundation, and the World Health Organization, plus the subjective responses of 80,000 people across 178 countries worldwide, Adrian White, an analytic social psychologist at Leicester developed the first "World Map of Happiness”. The countries that are found happiest are those that are healthy, wealthy, and wise. Smaller countries with greater social cohesion and a stronger sense of national identity tended to score better, while those with the largest populations fared worse. Good health may be the key to happiness, but money helps open the door. While admitting that happiness is subjective, White defends his research on the grounds that his study focused on life satisfaction rather than brief emotional states. The frustrations of modern life, and the anxieties of the age, seem to be much less significant compared to the health, financial, and educational needs in other parts of the world.
• On the World Database of Happiness, which is based on average responses to a question about life-satisfaction, the determinants of happiness include (a) economic development, political democracy and a cultural climate of tolerance, (b) the individual’s position in society; not only the position on the social status ladder, but also inclusion in social networks, (c) psychological strength, assertiveness and self-understanding, (d) sheer good or bad luck.
• Dr. Luisa Corrado, a Marie-Curie fellow at the economics department of Cambridge University in Britain, confirmed through studies and research that our happiness and well-being would be more likely to flourish in a mutually supportive and trusting society. It is not enough for governments to focus on improving wealth and material standards of living. Well-being goes beyond the maximization of each individual's pleasure or wealth. Public contentment is the outcome of individual, social and institutional factors such as social cohesion, an effective welfare state, social mobility, low unemployment, higher income, and less inequality. This is because people measure their satisfaction against the success of others. Here, the individual not only maximizes personal pleasure, but also considers how institutional, environmental, personal and relational factors are affecting his whole life. However, Corrado also observed: "We cannot think about becoming happier forever." In fact, she noted, although people (in advanced countries) are generally much wealthier than their fathers and grandfathers, their levels of happiness are either equal to or below those 50 years ago.

From these studies, happiness or well-being may be considered as an offshoot of a more holistic complementation of factors which include social cohesion, higher income, health & environment, good governance, and psychological vigor. To talk about more money per se as an indicator of happiness is insufficient. As proposed by in 2006 by Med Yones, the President of International Institute of Management, Gross National Happiness as a socioeconomic development metric which is an index function of the total average per capita of the following measures: Economic Wellness, Environmental Wellness, Physical Wellness, Mental Wellness, Workplace Wellness, Social Wellness, and Political Wellness. Also Bhutan’s King Singye Wangchuk coined in his definition of Gross National Happiness that the true development of human society takes place when material and spiritual development occur side by side to harmonize and reinforce each other.

Are we happier then when we have more money? Yes but No. Or we better modify the question. What do you say…