The Hindu Business Line : Earn the income you want from work you love

Children should definitely be taught about money. Most of this teaching process occurs by example. Do not lecture them extensively. Do not complain to them about your spouse’s financial behaviour. Children are natural entrepreneurs, because entrepreneurship is a human being’s natural state.

MR PHIL LAUT, AUTHOR OF ‘MONEY IS MY FRIEND

Wealth is not an accident, avers Phil Laut ( www.phillaut.com), author of Money Is My Friend ( www.jaicobooks.com ). Money exists to express your purpose and your values, he explains. “If you think that wealth will corrupt you, then you are corrupt already with little means to express this,” Phil reasons, in the course of a recent e-mail interaction with Business Line.

His definition of ‘financial freedom’ is simple. It is the result of being able to earn the income you want from work you love, says Phil. His book, which he self-published in 1979, ‘after rejections from a half dozen major publishers,’ has since sold ‘more than 4 lakh copies.’ It talks about ‘the four laws of wealth’ to describe the interaction between a person’s thinking and financial results. Specifically, the laws describe this interaction related to earning, spending, saving and investing — the complete spectrum of economic activity.

Excerpts from the interview:

What are the basic principles of investing?

Successful use of ‘the investing law’ implies knowledge of the first three laws of wealth, viz. the earning law, the spending law and the saving law.

Investing is spending money that you saved, in your name, to increase your income. The basic principles have far more to do with psychology than with economics. If all you have is an understanding of financial markets and don’t deal effectively with your own psychology, it is possible, but unlikely, that you will get rich, but you certainly won’t sleep at night. For this reason, there is no one approach that works for everyone.

There is a bewildering variety of investment choices available today. There is a free market. This means anyone can invest in whatever he or she likes (or unfortunately whatever he and she is sold by a financial advisor who picks the recommendations based on what benefits the advisor). This means that any investment vehicle MUST offer some advantage over its competitors in order to continue to exist over time.

If you are looking for the best investment advisor, look in the mirror. No one will ever care more about your investment success than you do.

Clearly, it is a negligent omission that investing principles are not taught in school. Keep in mind that if schoolteachers understood and used investing principles, it is unlikely that they would settle for government jobs.

There are two essential criteria (different for everyone) that any investment strategy must meet. These are: time and risk.

First is the amount of time each week you want to use for evaluating your portfolio and actively managing it. If this is less than two hours per week, then stay away from investing.

Also in the time category is your personal time horizon. This means the approximate date you plan to liquidate your investment portfolio. It could range from the next day for very short-term traders to never for those who are investing to build a family legacy.

Second is the amount of risk you can tolerate. All investments involve risk. There is no such thing as a risk-free investment. Even if you stick bank notes into a safe-deposit box, you have the risk that your cash will lose purchasing power due to inflation or due to foreign currency changes. So the question here is what risk can you tolerate and still sleep at night.

These criteria are different for everyone. There is no right answer.

Should children be taught to manage money? Is it to be done in a gradual manner?

Yes, children should definitely be taught about money. Most of this teaching process occurs by example. Do not lecture them extensively. Do not complain to them about your spouse’s financial behaviour. Children are natural entrepreneurs, because entrepreneurship is a human being’s natural state. Being dependent on a job is not natural, but rather the result of years of conditioning. An entrepreneur is what everyone would be if people had left them alone.

How should couples handle money?

This is a very important topic that is almost always clouded by family conditioning and foolish romantic notions. It is essential that both partners have money of their own to use as they see fit free from permission and judgment, even if only one of them is earning an income.

Who is better at handling money — the man or the woman? Is it possible to save marriages from cracking by better money management?

Sex is not the determining factor in who manages money better.

YES, marriages can be saved by better money management. A marriage is a romantic relationship, a sexual relationship, a social relationship and also a financial relationship. When the financial relationship is not harmonious, this quickly spills over into the other areas, as many couples have already discovered.

Do you find parental disapproval syndrome a common phenomenon? What are other such blocks that hinder one in becoming wealthy?

Parental disapproval syndrome is the major inhibitor of financial success for almost everyone. This seems to transcend culture, religion and background, by subtly and gradually teaching (over a period of 20,000 meals) the idea that approval of others is essential to well being! For this reason, fear of disapproval can keep people stuck in self-defeating, self-sabotaging thinking and behaviour for decades. Yes, everyone is different and in some cases there may be other psychological factors at work.

Why is making peace with prosperity a must?

This involves rejecting the parental and sometimes religious admonitions that it is not OK to be wealthy, that there is a limited amount of good in the universe — so any good you get means less for others, that wealthy people are corrupt and so forth.

Is there a link between money and spirituality? How important is it?

The answer depends of what you mean by spirituality. If you mean that spirituality is the recognition and constant awareness that there is a power greater than we, a power that anyone can use to extend his or her capabilities, then the answer is definitely yes.

Obviously the recognition of this Power aids anyone in any endeavour whether financially related or not. Contrast this to most organised religion that teaches people that they are poor miserable sinners who only barely deserve to survive.

Can one plan a perfect career?

With adequate creativity and drive, anyone can plan anything.

Should employees learn to negotiate a salary raise? How?

One of the disadvantages of relying on a job is that the employer possesses a majority of the power in the employer-employee relationship. The employer sets the wages, and you basically take it or leave it; additionally the employer determines the length of your employment.

For many self-determined people, such an arrangement is only slightly superior to being dependent on one’s parents for money. Nevertheless, as an employee, you have far more to offer your employer than a child has to offer its parents.

When I was an employee in a computer business, I was blessed with a great boss in a rapidly growing company. Once a year, I would negotiate a plan with him about what I intended to accomplish during the upcoming year and the raise I could expect when this was accomplished. Clearly this method may not work in all companies. Almost everyone is better off with his own business than with a job.

When does one know that it is time to quit the job and be on one’s own as an entrepreneur?

As soon as possible. Start a business now part time doing work you love.

By applying the principles in Money Is My Friend to your mind and to your business, you will be ready to quit your job in six to 12 months.

What are the six most important things that a new entrepreneur has to bear in mind?

Personal responsibility: Each of us creates our reality based on the thinking that inhabits our consciousness.

The good news is that you have methods to uncover and become aware of the thinking under the surface that is now causing problems and then change this. The tendency that some people have, to blame outside influences or other people for their problems, renders them too helpless and dependent to make any kind of progress.

It is OK to receive income and support from various people and places at once: Parental conditioning typically leads a person to conclude that he or she is dependent on receiving the good things in life from one source — mommy — creating the expectation that dependency is the price of receiving. This expectation carries over into adult life for many people leading them to think they require a job for income.

D. MURALI

G. PADMANABAN

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