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Automatic wealth The 6 steps to financial independence - Masreson M.

Masreson M. Automatic wealth The 6 steps to financial independence - Wiley & sons , 2005. - 291 p.
ISBN 0-471-71027
Download (direct link): automaticwealththesixstepsto2005.pdf
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We’ll talk more about that later. But now, let’s talk about Mike Tyson.
The Sad Story of Mike Tyson: A Spending Fool
During the 20-year span of his career, Mike Tyson’s income exceeded $400 million. Yet in 2004, before his 39th birthday, this amazing moneymaker was $38 million in debt. He had some assets—equity in some mansions, some cars, and some jewelry—but insiders speculated their total value at less than $3 million. For the sake of wishing him well, let’s assume it was twice that much. That would have put his personal net worth at negative $32 million.
Think about that: minus $32 million!
That could make him the world’s poorest man. With a negative net worth that large, Mike Tyson is 160,000 times poorer than the average wage earner from Sierra Leone, the poorest country in the world, with an average annual income of $200 per person.
“How can a man with a $4 million estate in New Jersey be poor?” a colleague asked me.
“He can still make millions every time he fights,” my sister said. “Anyone who can make millions isn’t poor.”
Yet by every recognized standard of accounting, he is poor. Extremely poor.
But he doesn’t think so. And that’s part of the reason he got so poor in the first place. The faster money came in, the faster it went out. Stories about his profligacy are already legendary. Tyson employed as many as 200 people, including bodyguards, chauffeurs, chefs, and gardeners.
He spent:
• Nearly $4.5 million on cars and motorcycles
• $3.4 million on clothes and jewelry
Step 3: Develop Wealthy Habits 83
• $7.8 million on “personal expenses”
• $140,000 on two white Bengal tigers and $125,000 a year for their trainer
• $2 million on a bathtub for his first wife, actress Robin Givens
• $410,000 on a birthday party
• $230,000 on cell phones and pagers during a three-year period from 1995 to 1997
The purpose of this is not to shake a finger at Mike Tyson, but to alert you to the dangerous temptation to spend more when you make more. As someone who grew up drinking powdered milk and wearing hand-me-downs, I understand the strength of that temptation.
Why Spending Feels So Good
Why do we do it? Why do we feel the need to spend more when we make more?
Here’s what I think. When you are poor, you are surrounded by things you think you would like to own but cannot afford to buy. After a while, you equate the feeling of unsatisfied desire with poverty. And when desiring begins to feel poor, having seems like it will make you feel rich.
That’s the heart’s logic, at least.
When I was about 14 years old, I got my first legitimate job working at a car wash on weekends. I worked 12 hours every Saturday and got paid $1.75 an hour—about $28 (counting tips) a week more than I had ever earned from chores. I remember distinctly the first thing I bought with that money: a pair of pointy-toed, buckled boots. They cost $42, two weeks' pay. Worth every penny, I thought, because they gave me something I was yearning for—the feeling of being rich.
I wore them to a birthday party that weekend. I was smitten by the birthday girl and dressed to impress. The shoes were a big part of my getup. But no sooner had I stepped into the room when someone pointed to my shoes and started laughing. The laughter was of the contagious variety. Apparently something had happened in the world of fashion that I was unaware of. The shoes went into the closet that evening and never came out again.
If that’s the way you feel now—if your idea of being wealthy is filled with images of mansions and sailboats and expensive watches—you are going to have a difficult time saving money. And saving money is another one of the common habits of people who know how to build wealth.
The rich save more than the average person. Relatively speaking, that is. I don’t mean they save more because they have more money to save. I mean they save more in general, because they have a saver’s mind-set.
According to Thomas Stanley, author of The Millionaire Next Door, the average millionaire is much more frugal than you or I would have believed. (By the way, Stanley gets most of his data from the IRS and other government sources.) For example, the average millionaire
• Drives an older car
• Buys inexpensive presents
• Eats at home and seldom dines out
• Takes a vacation every other year
• Wears clothes until they fray and resoles shoes when they wear thin
To develop a saver’s mind-set—a wealth builder’s mind-set—you must change the way you feel about spending. You must teach yourself to feel the truth: that every time you buy a depreciating asset, you become poorer.
Remind yourself repeatedly that most of the junk you buy (1) becomes unused after a few months and (2) doesn’t provide you with that much value anyway. Remember that the best things in life—the picnics you have with your family, the walks you take with your lover, the time you spend with your friends—are free, or nearly so.
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