I Love Free Markets


“The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society’s legal apparatus remove all obstacles the best it can. Permit these creative know-hows freely to flow. Have faith that free men and women will respond to the Invisible Hand. This faith will be confirmed. I, Pencil, seemingly simple though I am, offer the miracle of my creation as testimony that this is a practical faith, as practical as the sun, the rain, a cedar tree, the good earth.”

Leonard Read, “I, Pencil”

I recently ordered a pair of Bluetooth wireless sport headphones with noise cancelling technology that will interrupt the audiobook I am enjoying on my smart phone whenever I receive an incoming call. While hiking up the mountain trails that surround my rural Montana town, I will be able to  carry on a hand’s free conversation through my headphones, and the audiobook will resume where I left off when I end the call. The headphones cost me $19.77, and they will be delivered to my rural Montana doorstep in two days at no extra charge. I love free markets.

In 1958, Libertarian founder of the Foundation for Economic Education Leonard Read wrote an essay titled: “I, Pencil.” In this essay Read highlights the wonders of capitalism. While we take the common pencil for granted – we see them everywhere and they cost practically nothing – the pencil is anything but simple. Although the pencil is only made up of four components: wood, clay, metal, and rubber, none of us has ever made our own pencil, and most of us wouldn’t have a clue how to do so. As the essay describes, free markets have wonderfully brought millions of people together from many nations to produce a product as complex as the pencil in such a way that  is now so inexpensive and ubiquitous that we take it for granted.

A couple of years ago, Linda and I wintered in Arizona. As we traveled throughout the state, I marveled at how much food is grown in what I considered a desert wasteland. We didn’t have to drive far from town to see acres and acres of citrus groves, dairy farms, fields of lettuce, or grape vineyards that supply Arizona’s growing wine industry. It fascinated me to see Americans producing more food than they could personally eat out of ground that seemed incapable of growing anything.

Recently, I have seen a steady stream of  news stories reporting Venezuela’s food
shortages. Photos of empty grocery store shelves and toilet paper riots are shown on social media every day. It seems strange a country with such an agreeable climate for growing food, and adjacent to a ocean teeming with fish, would have so much trouble feeding its people when Americans living in the Arizona desert 14600624444589are able to grow a cornucopia of plenty.

Venezuela is an example of a centrally planned economy where the government controls nearly every aspect of the food market. Recently, the government forced farmers and food manufacturers to sell anywhere from 30-100% of their products to the government at prices lower than the what the private grocers and supermarkets are willing to pay. This has caused the farmers and food manufacturers to stop producing food at a loss. Instead, a black market has developed where toilet paper, rice, flour, cooking oil and other staples are being sold at six times higher than the government’s fixed prices.  In other words, the Venezuelan government’s efforts to force food producers to produce below market prices has essentially caused shortages that have pushed prices up significantly higher. Nowadays, a pound of cheese purchased on the streets of Caracas costs 50% more than my new headphones.

In spite of the fact that we take cheap pencils, toilet paper, and basic food staples – not to mention refrigerators, birth control, contact lenses, cell phones and jet travel – for Venezuela-supermarket-looting-reuters-640x480granted,  there are many people who believe that free markets “don’t work,” and that there is something nefarious about the profit motive. What we are seeing in Venezuela is an excellent example of what happens when bureaucrats rather than customers determine the prices of goods and services sold in the marketplace. In Venezuela’s case, when the government dictated prices lower than producers could profitably meet, they just stopped producing food, and as demand increased, black marketeers began smuggling  in and selling those same products at prices high enough to compensate them for their risk of being arrested and possibly thrown in prison.

The Venezuelan people are capable of producing more than enough food to feed themselves and others; unfortunately, their government’s policies discourage them from doing so.  But in spite of the Venezuelan government’s well documented blunders, there are millions of Americans who believe there is something immoral about the profit motive that inspires Americans to do back breaking work in the Arizona desert harvesting lettuce so that people in New York City can enjoy a nice salad. Markets do work when they are free, and it is ironic to see so many people using smartphones made in China, intellectual property from the United States, and materials mined in Africa, to communicate on social media that they prefer an economy that more closely resembles Venezuela’s food distribution system to that which produced their phones. Free markets aren’t perfect, but I prefer living in a society where UPS deliverymen have incentives to deliver my inexpensive luxury headphones to my doorstep rather than a society where we have to stand in long lines for hours to pick up our weekly government allotment of toilet paper and cooking oil. Sometimes the blessings of free markets are so abundant it is easy to lose our appreciation for them.


I am a Christian Communist

I love to debate. Recently in the heat of an ongoing Facebook argument, my opponent accused me of being a communist.  I believe the last time I was accused of being a communist was grade school. However, after much introspection, I had to admit that I am a communist.  In 1991, on the border between Saudi Arabia and Kuwait, I became a Christian communist, and I have been a passionate member of my commune ever since.

In my Christian commune, we are taught to behave in ways that bring honorgroup-people-holding-cross-praying-back-lit-41953590 to our leader, and there is a rulebook that hasn’t changed for centuries. In my commune people are expected to follow the leader and the rulebook, and we are guided by a worldview that inspires us to give more to the commune than we take, and what we take from the commune we believe are gifts, not entitlements. There are some in the commune who habitually give less than their ability and take more than they need, but the system seems to overcome its challenges when properly lubricated with grace and forgiveness.

In my commune people often choose to deprive themselves of luxuries so they can afford to help the less fortunate in and outside our cUntitledommune. Although my commune is often ridiculed, insulted, and despised by its beneficiaries, my commune gives more than it takes from the outside community. My commune feeds the poor and heals the sick outside my commune, even when those outside my commune curse our leader’s name.

There was a heavy price I had to pay to fully reap the promised benefits of my commune membership: I was required to voluntarily choose the leader’s ways over my own. While I wasn’t necessarily kicked out of the commune when I was selfish, it appeared the more I gave, the more I received.  Because this contract was built on a supernatural belief, it was difficult to accept until I experienced it.

When I used to live outside the commune, life was more cynical and unhappy. It was confusing and frustrating living outside the commune because the rules were always changing, and they were so complicated everyone was afraid.  Outside the commune, people didn’t talk to their neighbors, and they used lawyers to solve even small disagreements.  Outside the commune, I was taught that inside the  commune life was oppressive and boring, but I discovered the people inside the commune are every bit as fun loving as those living outside the commune. Once inside the commune, I observed that many of the behaviors the outside proclaimed to be liberating were actually enslaving. Until I actually joined the commune, I was a supporter of the anti-commune movement; however, now that I am a communist, I find great comfort in my membership. What I experienced outside the commune routinely failed me, but what I have experienced inside the commune has been consistently positive. For me, life outside the commune was scary and unreliable; however, inside the commune life has been secure and reliable.

Now that I am a communist, I am often insulted and ridiculed  by people outside the commune for being a communist. (I guess it is only fair because I used to attack Christian communists myself). My commune is often attacked for being selfish, even though it has proven to be less selfish than the society outside the commune. My3a0bf7c1d41f7d1323ac327205bd52f9cd0de7fc90ef30b17c7bda7781a15895 commune is routinely called racist, even though my commune’s record on race is superior to that outside the commune. Finally, my commune is accused of propagating untruths, even though little I experienced outside the commune proved reliable. I guess what ultimately led me to exit the society outside and join my Christian commune was the continual disappointments I experienced out there.

I am often encouraged by people living outside to leave my commune and rejoin the society-at-large; however, I already know from experience how frightfully bad life is outside the commune.  I no longer desire to live outside my commune, where people are tricked into creating governments strong enough to force their neighbors into behaving and thinking a certain way, only to have those same strong governments oppress the very people who created them, and in ways the creators never intended.

I am proud of my commune’s record on social issues.  I know throughout history there have been embarrassments identified by those living outside my commune, yet the historical transgressions of my commune weren’t a reflection of the teachings of our leader, nor were they worse than the transgressions of societies living outside my commune. Though far from the perfection required by those living outside of my commune, my commune’s history has been net positive. It is a shame when those outside my commune bring light to our shortcomings and ignore our successes.

There are some in our commune who live their lives like they really believe our leader is the Truth. From the successes I have observed from these hard core communists, I want to be just like them. Others in our commune live like they believe some of what our leader says is true, and this group experiences varying levels of success. Many who join our commune live their lives exactly like they did when they lived outside the commune, and they are just as insecure and frustrated as they were before they joined.  The funny thing about our commune is it only works for the people who live their lives like they believe the leader’s teachings are true.

After living both outside and inside my commune, I prefer living inside. I often get frustrated when those outside my commune want the material benefits  my commune produces without the worldview that makes those material benefits possible. It is sad those who choose to live outside my commune don’t understand that it is our worldview, not its resulting benefits, that holds the real power.

Within my commune good and evil are easily discerned, and they are never changing; but outside my article-new_ehow_images_a07_4k_jp_fundraising-ideas-christian-youth-groups-1-1-800x8001commune, good and evil change every election. In my commune I am free to be good; outside my commune I am forced to be whatever is contemporarily decided by the majority (or a panel of life-appointed judges) to be good.

It would be wrong for me to force anyone to join my commune; however, I will testify it has proven better for me than life outside the commune. While it appears life outside my commune is spiraling towards destruction, I know I am secure within my commune. If my choice to voluntarily join my commune and follow the teachings of my leader makes me a communist, I plead I am guilty as charged.

Refugee Sponsorship and Christian Charity

I recently finished an interesting eBook titled: “The Three Languages of Politics,” by economist Arnold Kling. The premise of the book is that most of us view politics through one of three heuristic lenses in what Kling calls the “three axis model.” Kling opines we both transmit and receive information along one of three completely  Three Axesdifferent axes: an oppressor-oppressed axis, where the oppressor is evil and the oppressed is good; a civilization-barbarism axis, where civilization is good and barbarism is bad; and a freedom-coercion axis, where freedom is good and coercion is bad. While the purpose of this article is not to unpack Kling’s thesis in great detail (I will let readers invest their own $1.99 to do that), I will use the three axis model to suggest we often discuss politics in our own political language and when we do, we  render our positions greatly misunderstood by others who don’t speak the same political language. Case in point is Donald Trump’s recent comments on the presidential campaign trail, where he stated he wants to see a “total and complete sh1006687-trump-1449642179-968-640x480utdown of Muslims entering the United States until our country’s representatives can figure out what is going on.” The social media outlets exploded with outrage from many who saw his comments as racist and bigoted,  while others claimed his common sense approach to national security is sorely needed. One side is arguing against Muslim immigration along a national security axis; another side is supporting Muslim immigration along a religious freedom axis. Unfortunately, neither side is acknowledging the concerns of the other, and as long as we argue in our own political language exclusively, it will be next to impossible to develop a policy that comes close to being acceptable to half our population.

I believe there is a way to solve this dilemma that addresses the concerns of most, and it is through the practice of private refugee sponsorship. Unlike Canada, which has had a policy of private refugee sponsorship for years, there is currently no legal program available in the United States for individuals and/or groups to sponsor refugees. This has not always been the case. Under the Reagan Administration thousands of refugees were resettled in the United States by private sponsorship with very little taxpayer support, and the program was largely successful.

While much of the refugee argument has been framed in terms of Christian charity, I am not so sure there is anything particularly Christian or charitable about a policy of extracting taxes from all Americans to redistribute the funds to government selected voluntary agencies  and using the funds to resettle refugees where they are largely unwanted. The way to demonstrate Christian love for the refugee is to get the government out of the refugee resettlement business (with the possible exceptions of using federal agencies to conduct background security checks and public health examinations). Rather than allow politically motivated bureaucrats decide which immigrants will be net positives as new citizens, let individual private sponsors take the financial and social risks of bringing refugees to our shores. There are thousands of individuals and groups willing to use their own resources to demonstrate Christian love to refugees, and I say we let them.

By removing government from the equation, the sponsor will then be able to demonstrate genuine agape love rather than what I call “Facebook crusader feel good love.” The sponsor rather than the taxpayer can ensure the refugee has food, shelter, healthcare, education, and employment, as well as oversee the refugee’s assimilation into American culture.

The first step in demonstrating America’s Christian charity is to stop doing so by government decree. By allowing private sponsorship, we speak to the concerns of progressives, who will witness oppressed peoples not only being tolerated but embraced by individual sponsors. We speak to the security concerns of conservatives when refugees are supervised by interested private sponsors working towards the ultimate assimilation of the refugees. And finally, we speak to the concerns of  libertarians because citizens will not be forced to fund or participate in a government program against their will.

If the goal is to open America’s opportunity to foreign refugees while being mindful of national security concerns, and Christian charity is the banner under which we rally, then I believe a private sponsorship program for refugees is our best option.


Anyone of Average Ability Can Pay for College: Here’s How

For all the rhetoric we hear about college being unaffordable, the fact is, ANYONE with normal ability can attain a college degree. For the 2015-16 school year, the University of Montana’s  cost of attendance for an in-state resident is $16,599. While that figure sounds high, it is not overwhelming. The concept of seeking employment to raise funds for one’s own education currently resides outside societal norms, but working and saving are sure-fire ways to graduate debt free. Additionally, working one’s way through college ensures a  graduate will be more competitive against peers who lack any meaningful work experience.

Truth is, if you can get accepted into a state school, you can afford to graduate debt-free. Here’s how:

1) Beginning in your sophomore year of high school, find a part-time job and save $500/month working after school, and $1000/mo during the summers by working full-time. This job can be anything from flipping burgers in a fast food restaurant to stocking shelves in a hardware store. If you do this for 3 years, you will a save $22,500.Student-friendly-Part-Time-Jobs

2) Upon graduation from high school, live at home for the next year, and by working full-time and saving $1500/month, you will be able to save an additional $18,000.

3) Once you enter college, earn $750/month during the school year, and $1500/month during the summers. If you do this for 4 years, you will have earned a total of $45,000

Grand total: $85,500, which is more than enough to earn a 4-year degree at the University of Montana. I am making the assumption that the only jobs available to teenagers pay only $8.00 per hour, but a college kid with 4 years work experience should be able to make a much higher income waiting tables or working construction. For those kids able to earn scholarships or government grants, all the better,  and students willing to live at home and attend a local community college to complete their general requirements will experience even greater cost savings. However, the program above is a sure-fire way to guarantee there will be enough funds for college even if you have no other options but to pay your own way at a 4-year state college.

While some will argue that the work described above will rob kids of the joys of youth, I have seen how college debt and no previous work experience rob college graduates of the joys of young adulthood. Trying to manage the cost of an apartment, transportation, food, utilities, and a social life while simultaneously servicing a monthly student loan payment of several hundred dollars a month can be a real challenge; but, as I have demonstrated, student loan6194417_f520 debt is completely unnecessary for the student willing to think and act outside the box.

If someone convinces themselves that work is drudgery, it will be; however, if they choose to see work as a valuable way to please others, gain valuable work experience, and save the necessary funds to attend college, it is quite possible that work during high school and college will be a social and emotional -as well as financial – net positive.

Failing Health Insurance Cooperatives and the Future of Obamacare

Utah’s nonprofit health insurance cooperative, Arches Health Plan, recently announced it is shutting down.  This is the 10th health insurance cooperative (10 out of 23) to close their doors, citing lower than expected enrollment as the culprit. Billions in federal loans were made to these health insurance cooperatives for the purpose of providing a non-profit, credit union-like alternative to profit centered health insurance companies, under the theory that by removing the profit motive, health insurance cooperatives would be able to pass on their savings to policyholders. Unfortunately, those funds loaned to the now  shuttered co-ops are gone forever. (These failed co-ops should not be confused with the very successful health care sharing ministries (HCSM’s)). These closures were highly predictable. When the Affordable Care Act (ACA) was signed into law on March 23, 2010, it was a political victory but an economic disaster. Now that we are entering Obamacare’s third year, the full weight of what happens when policymakers ignore the tenets of basic economics are unfortunately starting to appear.

Because we understand the law of gravity, we know if we drop an object from a height it will fall towards the Earth. Similarly, because we understand the principle of adverse selection and the laws of supply and demand, we know that if not repealed or drastically adjusted, the ACA will ultimately end in failure.  Here is the sequence of events I wrote about in another blog back in July of 2012 before the implementation of the ACA that predicted some of the outcomes we are observing today:

(1) The ACA will increase the per unit cost of healthcare for everyone.
(2)  Some fortunate Americans will see their increased premiums subsidized by their neighbors, giving those subsidized the illusion of a cost reduction.
(3) Some unfortunate Americans will see astronomical increases in their health insurance premiums and income taxes.
(4) Healthy middle class Americans will eventually drop their expensive coverage and opt to pay the less expensive “tax.”
(5)  Insurance companies will incrementally leave the health insurance market until the whole scheme fails.

While governments can pass laws to suspend gravity or change the speed of light, they will fail because physical laws are unaffected by human desire. Health Insurance operates by certain economic laws in the same way matter follows physical laws in the natural world. According to the economic laws of supply and demand, if you increase the demand for a good or service and the supply remains constant (or decreases), the unit cost for that good or service will increase.  Good intentions can’t change this economic reality. Predictably, the ACA is increasing  demand for health care by entitling unhealthy, expensive patients to unlimited access. With state insurance commissioners  recently announcing premium increases of 5-35% across the nation, we will begin seeing rational, healthy, and inexpensive patients dropping their expensive health insurance policies by opting to exercise one of the several insurance mandate exemptions  allowed by law, or by paying the cheaper “tax” instead. The ACA magnifies the insurance problem known as “adverse selection,” where only people needing immediate health insurance buy it. Adverse selection is pushing  the cost of health insurance to astronomical levels. Using price controls and federal subsidies, the ACA attempts to prevent insurance companies from raising their premiums, making the sale of health insurance a losing proposition (too few healthy people paying in, and too many sick people making claims). As we are seeing with health insurance cooperatives, for profit health insurance companies are also exiting the market due to their inability to run profitable businesses under the ACA. Losing health insurance providers will eventually lead to reductions of quality as well as access to health care.
When governments violate economic laws by artificially holding down the price of a good or service, they inadvertently reduce the supply of that good or service. In the early 1970’s the government set the price of gasoline below market equilibrium, and the supply dropped overnight because gas station owners refused to sell gas at a loss. The same thing has happened historically with rent control. Whenever government uses its coercive powers to hold down rent prices below market equilibrium you get a predictable reduction in the number of landlords willing to rent property at a loss. We are now observing the identical experience with health care; governmental price controls are reducing the number of health care providers resulting in rationing and an erosion of health care quality and access.

Under the ACA, the unit cost of health care is rising for everyone; but, the cost increase of insurance premiums for lower income citizens is paid by someone else, giving the voting poor the illusion that the ACA has driven down costs.  If Citizen A is currently paying $400/month for health insurance that costs $400/month, but on 1/1/2016 he is charged $200/month for insurance that costs $500/month, Citizen A will think the ACA reduced the cost of health insurance when in reality someone else will be saddled with the increase. Unfortunately for Citizen B, he will experience a health insurance cost of $800/month; $500 for his own insurance and a $300  tax increase to subsidize his neighbor.
pull quote 2Whereas government subsidies and price controls almost always lead to increases in the unit costs of regulated goods and services, free markets allow unit costs to drop for all Americans. The unregulated costs of Lasik surgery, laptops, digital watches, and flat screen TV’s have dropped in unit price for EVERYONE. There has been no cost shifting for the aforementioned items, but instead universally experienced cost reductions in real terms for all Americans.  Poor people and rich people can buy a flat screen TV for prices much lower today than they could 10 years ago. The same can’t be said for the over-regulated health care market. The free market brings unit costs down and drives quality up for ALL consumers. Because the ACA has removed most of the free market forces that drive costs down and quality up, nearly everyone is experiencing higher costs per unit of health care and a simultaneous reduction in access and quality.

Many of the ACA’s supporters are claiming the law is a resounding success. They state that millions of people who once were denied health insurance because of pre-existing conditions or expensive premiums now have access to it. What the ACA’s supporters don’t admit is that millions of different Americans are rapidly finding health insurance so unaffordable they and/or their employers are dropping coverages due to unaffordability. Insurance programs don’t survive when unhealthy, expensive people sign up to buy at the same time healthy, inexpensive people are leaving.

While it is true the American health care system is in need of a complete overhaul, the Affordable Care Act is not the answer. Due to the immutable economic laws of adverse selection and supply and demand, the ACA, is failing, When the ACA does fail, I hope we learn from our mistakes and consider using free market solutions that have reduced prices and increased quality and access wherever free markets have been allowed to operate.

Investing in Real Estate

I have been in the finance business for 20 years, and I personally own rental properties.  I understand the concept of using real estate to help save for retirement, but I would caution anyone before using leverage to accumulate wealth, whatever the investment may be.

Real-Estate-Investment-Principles-KeyI know several people near retirement age who own investment properties with mortgages that are “underwater,” meaning the owner owes more on the mortgage than the property is worth.  As a result, their prospects for retirement look grim.  In the early 2000’s, many people bought real estate with borrowed money, either as their primary residence or as an investment property.  Even though home prices have bounced back since the real estate market crash of the late 2000’s, many mortgages, and not just those on investment properties, are now “underwater,”

That leaves many people who own investment properties in an unenviable situation: sell the property at a loss and pay the difference in cash if they can afford it, or rent it out at monthly rates that in many cases are lower than the mortgage payment.  Both options lead to a financial loss.

One third ruleWhen asked about rental property as an investment, I tell clients to consider the “1/3 Rule”: no more than 1/3 of your net worth in your residence(s), no more than 1/3 of your net worth in rental real estate or illiquid businesses, and at least 1/3 of your net worth in liquid assets like cash, stocks, bonds, mutual funds, etc.  Like stocks and other investments, real estate can experience dramatic price declines. It is nearly impossible to buy only a small amount of real estate (i.e., $10,000 or so), and selling property isn’t as quick and easy as calling your financial advisor and placing a stock trade.  If you decide to buy investment real estate be careful not to become “real estate rich” and “cash poor.”  When the economy goes sour, cash is king, so always keep a little hay in the barn for emergencies. With proper diversification, an investor has options and won’t be forced to sell real estate and other investments at a time not of their own choosing.

I discourage investors from using borrowed money to buy real estate unless they are sure they can make the necessary payments or pay off the mortgage. Could your spouse go back to work if you lose your job? Did you make a large enough down payment (20% for a home, 30% for investment property) that you could sell the property without being underwater on the mortgage? Leveraged real estate deals have a way of being perfect storm magnets. I know folks who not only made their living in real estate, they also speculated on real estate deals, losing both their jobs and future retirement funds in the 2008 real estate crisis. Inevitably, the same time real estate values are dropping, both you and your tenant are bound to lose your jobs.
If you are interested in buying investment real estate, then I urge you to follow the 1/3 Rule  as well as the WealthMasters Milestones.  Be mindful of not owning too much of any one type of investment, or using excessive leverage to reach your retirement goals.  Buying rental properties with borrowed money can easily become a nightmare if you find yourself pinched. If your properties lose value, the lenders are going to expect you, not the renter, to make good on your mortgage payments.

There Is No Such Thing As Free Tuition: Who Then Must Pay For It?

Many politicians view the world through a  “normative” lens. Normative statements often include the words “ought” or “should.” This is in contrast to viewing the world through a “descriptive” lens, which explains how things actually are. Case in point is higher education.  Several candidates are hitting the campaign trail stumping for “free” college education. While it would be nice to offer “free” college, the reality is there are no free educations in the natural world. Someone must pay, and the challenge is determining who will ultimately be handed the bill.

History has demonstrated that whenever the federal government provides citizens something for “free,” the actual cost of that good or service rises faster than the rate of inflation. Additionally, the quality of that good or service tends to go down commensurate with the level of government subsidy received. Public education, health care, and even the food we buy at the grocery store are all heavily subsidized, and their costs have risen much faster than the rate of overall inflation.

Young people who support the idea of universal college should also ask themselves whom should be saddled with the responsibility to pay for it. Historically, the most productive people have been those between the ages of 25 and 55, so it isn’t a stretch to assume they are the ones who will be saddled with tax burdens to pay for other people’s “free” educations.

It doesn’t make sense to support programs that unnecessarily raise the cost of education, which must then be paid primarily by 25-55 year olds. It stands to reason that when governments offer 18-22 year olds “free” college, they will eventually pay for their artificially raised tuition via a lifetime of increased taxes. It is economically wiser for young people to support policies that will keep their current college expenses AND future taxes lower, as they will eventually leave the ranks of the subsidized and enter the ranks of tax payer.


I enjoy debating ideas on social media, and a topic of particular interest is economic inequality. A surprising number of people are convinced the economy is rigged in favor of the wealthy class.  I believe this is an inaccurate depiction of reality. Having professionally helped hundreds of people over the last two decades move from the lowest wealth quintile to the highest quintiles, I have observed the game IS rigged: in favor of those who don’t think poor. In this article, I’ll explain exactly what it means to “think poor” and how to stop.


The majority of the people I encounter who struggle financially are perfectly capable of being prosperous, but they have the wrong mindset about money and their personal finances.  They “think poor.” And, to paraphrase René Descartes, they think, therefore they are. In fact, for the person of average intelligence and ability, I believe prosperity is 80% mental attitude and only 20% mental aptitude.

EXCUSE TENNISA crippling effect of thinking poor is fixating on obstacles rather than opportunities. When I counsel poor-thinking people, they often prefer playing the game I call “excuse tennis.” Excuse tennis is played whenever someone shares with me their goals, but every time I offer a suggestion to increase their odds of achieving them, they knock down the suggestion with an excuse. For example, let’s say someone wants to increase their income, so I recommend they seek different employment that offers higher income opportunities. Once I send my recommendation “over the net,” they volley it back with an excuse such as: “I really like my current job,” “I don’t want to move,”  or “I would need to go back to school first, and I don’t have the money.”  When I return their excuse with a recommendation to sell some toys, get a temporary part-time job, or start a small business to come up with extra money, they declare their toys too important to be sold, they don’t want to be a slave to work, or their health or pride won’t allow them to engage in physical labor. People must stop playing excuse tennis if they want to escape poverty.   Focusing exclusively on problems prevents us from dedicating our full attention on solutions resulting in lost opportunities. .

Another trap of poor-thinking is trying to achieve immediate prosperity with borrowed money. Benjamin Franklin once said: “The second vice is lying, the first is running in debt.”  Debt is not now, nor will it ever be, your friend.  When you are in debt, the money you earn does not belong to you. You simply work for two masters rather than one, and you keep less of your earnings for doing so.

A third trap of poor-thinking is comparing one’s circumstances to others instead of  contending with one’s own circumstances. The person who fixates on the man who has more is wasting valuable time and energy that could be better spent on activities capable of creating and obtaining financial security. I have a friend I see regularly who is frustrated by how much others have, and his envy makes it virtually impossible for him to see his own opportunities for improving his economic situation. When one man makes $20,000 per month and another only one-tenth as much, it does the lower paid man no good to concern himself with the higher paid man’s income, how he spends it, and thWealthMasters Milestonese level of the higher paid man’s compassion and generosity. By following the WealthMasters Milestones of avoiding debt, and staying gainfully employed, even the modestly paid person can achieve financial security over time.

Insanity is often defined as doing the same thing over and over again and expecting different results. To improve one’s situation it is important to adopt a lifestyle of self-improvement. It’s easy to see what’s wrong with others, but self-improvement is much more difficult. The first step in shedding poor-thinking is committing to make tomorrow better than today. Once this commitment is made, goals can be established for improving one’s spirituality, physical health and nutrition, relationships, intellectual growth, and personal finances, and an action plan can be developed to ensure activities are completed in pursuit of these established goals.

Self-improvement requires courage, especially if one’s most intimate social circles are also caught in the traps of poor-thinking. Successful people tend to enjoy assisting others who are pursuing success, and most communities have more mentors than there are people seeking their help. Good mentors can be found in most churches, local chambers of commerce, or even within one’s family, but it takes courage to ask for help.   I have mentored dozens of young people over the years, and I am often frustrated that more haven’t been interested in being mentored.

Anytime someone embarks on a path of self-improvement and personal growth, there will be hardships and challenges. Poor thinkers succumb to these hardships, even though most obstacles can be overcome with perseverance.  By enduring difficult times, we become stronger and more experienced, and over time the obstacles seem smaller and less obstructive. When times get tough, seek out mentors who have endured similar challenges on their own paths to success.

poor thinkingMost success takes place between the ears. For those who are tired of the trappings of poor-thinking: 1) stop playing “excuse tennis; 2) avoid debt; 3) stop fixating on what others have; 4) commit to a plan of self-improvement; 5) seek out mentors; and 6) practice endurance when things get difficult. When we stop “thinking poor” and start actively working towards positively change in our lives, we position ourselves to obtain financial security and human flourishing.

Can Bookkeepers Live With Spenders?

166008950 [Converted]-editIn a typical marriage, there are usually two types of people: one spender and one bookkeeper.  This is not always the case, but since we tend to marry our opposites, chances are if you’re a spender, you married a bookkeeper, and vice versa.

Spenders, see financial security differently than bookkeepers.  To the spender, earning a regular income is seen as financial security.  As long as there is a paycheck and someone else pays the bills, they are content to keep spending. .

The bookkeeper is the opposite.  To them, financial security is money in the bank.  Each bill is carefully analyzed to minimize the effect it might have on their bank account.  The bookkeeper wants to protect the balance in the account at all costs, and marriage to a spender-who shows no appreciation for the mathematics of spending less than is earned-can be extremely stressful.

When a bookkeeper is married to a spender, the spender often spends money or assumes a financial obligation, and then drops the bill off with the bookkeeper for them to deal with it.  The bookkeeper at some point feels pressure to confront the spender to stop them from spending, but they oftentimes prefer to avoid such confrontations. Spenders often incorrectly assume they are earning more than they are spending, and when confronted about excessive spending, they can accuse the bookkeeper of poor bookkeeping.

Much of the time, the two different philosophies balance each other out.  The spender gets what they want and the bookkeeper gets what they want, so long as there is a working relationship between the two.

But when that working relationship breaks down, financial chaos can—and most likely will—ensue.

So what can be done to maintain a healthy working relationship?  The spender needs to sit down with the bookkeeper and understand the finances.  Typically, the spender just knows when the money comes in and then spends it.  The bookkeeper then has to make sense of that spending and make sure it’s sustainable.

Ultimately, there needs to be a calm, rational conversation about savings goals and what level of spending will support those goals.  I recommend spender and bookkeeper spouses sit down with one another at least once a month to discuss the family finances. This will ensure the spender sees what the bookkeeper is seeing. WARNING: The spender needs to maintain a level of interest and empathy for the bookkeeper’s role during the meeting; bookkeeping is more stressful and important than the spender usually realizes. The bookkeeper shouldn’t attack the spender, and the spender shouldn’t accuse the bookkeeper of being a financial “buzz kill”.

Remember, if you’re married to your financial opposite, it’s a partnership, not a war zone.  Bookkeepers aren’t magicians; they can’t create money out of thin air to cover the spender’s expenses. Make a budget that allows for spending but also allows for savings.  I also recommend that both the spender and bookkeeper be allocated monthly Mad Money that allows each spouse the ability to spend (or save) without acquiring the permission or involvement of the other.  Mad money alleviates a lot of marital financial tension; make sure it is large enough to alleviate stress but small enough to ensure all family financial goals and obligations are met.

Yes Virginia, spenders and bookkeepers can live under the same roof, and truth be known, they probably should.

Image credit http://blog.timesunion.com/518life/files/2014/05/Money_Illus_tp.jpg

Mad Money: Spending Money Without Getting Permission From your Spouse

marriage money-saidaonline“I am 40 years old; I don’t need to get permission to spend money on myself!”

Over the years, I have seen marriages fall apart as both spouses spend money on expensive items the family can ill afford.

We know one couple where the husband went out and bought an expensive home entertainment system and the wife retaliated by buying fine bone china and a complete dining room set; they aren’t married any more.

Every family’s income is finite, and most couples agree on the majority of their expenses (i.e., mortgage, gas, groceries, etc.); however, couples will often fight over items where they don’t share passion. The husband may want a hunting rifle, but the wife might enjoy buying clothes. It can be stressful to ask your spouse to allow you to spend family money on things they don’t find valuable. The solution to this challenge is “mad money.”

Mad money is a line item in your family budget, and every month it gets funded in the same way as  food, housing, utilities, etc.. Think of Mad Money as an allowance.  Each month, you fund, say, $100 each.  That money can be spent  by each spouse on anything, no questions asked.  If the wife wants to buy an expensive pair of shoes or wants to go out to eat with friends, so be it.  If the husband wants to use part of that money getting a sports pay-per-view channel or upgrades for the engine of his muscle car, that’s no problem.

Money carries with it great emotional weight.  We see money as our key to doing just about everything, and not having money essentially means we can’t do the things we want, be that buying new shoes, eating out at a restaurant, or seeing a movie with friends. When your budget does not allow for these impulse purchases, it can lead to stress.  I’m sure any married couple can recall at least one argument over the number of shoes a wife continues to buy, the amount of money a husband spends hunting trips, etc.  These often result from one spouse seeing the other spouse’s purchase as frivolous.  Mad Money solves this issue.

That’s the beauty of Mad Money.  It forces people to prioritize what they actually want, while letting them “waste” a little on trivial things that we all are guilty of wanting.  And the best part is, since Mad Money is in the family budget, you can spend every penny without any guilt and without having to justify your purchase to anyone else.Getting-married-Dont-fall-for-money-myths-BN106A2H-x-large

In short, buying things we want can be cathartic, but without planning, it can easily break the most carefully-planned budget.  Mad Money ensures you are spending within your means while giving you all the emotional release of getting things we want without having to get permission.