Make yourself richer tomorrow than you are today

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D. Murali

IF you're already wealthy, skip this. Else, take the six steps that Michael Masterson prescribes for `financial independence' in his book Automatic Wealth, from Wiley (

"My expertise is in starting and developing small businesses, and I've had a good deal of success with start-up real estate ventures and investing in small business and real estate," writes the author in his preface, and informs that the book is based on his experience, and not a `conventional financial planning' text.

Becoming wealthy is not about discovering some secret or stumbling upon a pot of gold, reminds Masterson. You need to change your habits. Are you willing to invest 7 to 15 years, he asks? If yes, his six-step programme will work for you, "no matter how little money you have in the bank... even if you currently have a negative net worth."

First step is to recognise reality. "Follow popular financial gurus and stay poor," reads a section which cautions you against the concept of scrimping and saving, that are, crawling toward retirement, "clutching pennies until your fingers turn green." Masterson debunks the myth that getting wealthy means cutting corners. Also, don't count on your company's pension plan or the government "to take care of you when you get older," because "it's up to you."

There are many things you cannot do - such as control the economy, predict the markets, prevent disasters and so on. "But you can make yourself richer tomorrow than you are today." How? "Work an extra hour in the morning. Work another extra hour before you go home at night," because: "Every day that passes is 24 hours of opportunity you won't have again. Why not put a bit of that time to work for you right now?"

Step two is to plan, for wishing to be wealthy is not enough. But do not set tomorrow as the starting date. It's now. "Everyone who puts off change fails to make it." However, as the author points out, you need to be happy and healthy, apart from being wealthy. For that, identify your core values and translate them into `four lifetime goals.' One, to build wealth - not for its own sake but for it can help accomplish in terms of your core values. For the other three, Masterson recommends one about health, another about personal relationships and the last to target "your own growth and development." To turn wasted time into productive time, there are `eight secrets'!

Third step is to develop wealthy habits. "It is how you act, not what you think, that will determine your success. It is how you think, not what you do, that will determine your happiness." Masterson, therefore, does not believe that the secret to becoming wealthy is to fill your head with positive thoughts. What you need are certain behaviour patterns "to do what wealth builders do and not waste any time getting your mind fixed beforehand."

Here's a paradoxical tip: "To master a skill as quickly as possible, practise it slowly." And, as Howard Roberts, the legendary jazz guitarist said, "Never practise a mistake." There are not seven but eight habits of "highly successful wealth builders," you can get to know from Masterson.

Step four is to radically increase your income, because you are not going to get wealthy through wage increases, because cost of living also rises. Which is why one finds that working people become poorer, not richer, "despite higher nominative wages." For above-average pay, you may have to deliver above-average work. So, first "become a better employee," and second, ensure that those who matter know you are better. The threefold way to successful self-promotion in a business environment is to promote only what is true, give credit to others, and be persistently self-effacing. Masterson devotes many pages to step four because it is here that you lay the foundations for your second, third, and fourth incomes.

Next, get richer while you sleep, by investing in equity. There are tips from Steve Sjuggerud you can follow: Invest in what you know; be suspicious of stock stories; be conservative with each investment; and have a Plan B.

Steve's stock selection protocol respects the "organic, impulsive, sometimes erratic nature of the market," explains Masterson.

Last, retire early, because you can be free to think things other than the money-related. In this last chapter, the author explains his rating of risk on a 1 to 10 scale, from the least risk to the highest. Stocks score 8, bonds 2, side business 6 and real estate 3. He is bullish on entrepreneurship, and lays down the simple rule for starting a new business: "One baby step at a time." Masterson paints four model portfolios, starting from less than $25,000 and ending at when you're `financially independent' - meaning "you have at least 10 times the amount of post tax income you need to enjoy the kind of life you want to live."

Are you expecting the book to fall on your lap automatically?

(This article was published in the Business Line print edition dated March 20, 2005)
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