
Financial Fundamentals
The other day I while I was having lunch with my family at the park, I noticed a juggler who was practicing. It was interesting to see him warm up and go through some very basic exercises, because usually when you see a professional juggler they are doing something like juggling fifteen knives and flaming torches while blindfolded. Most don’t stop to think that there any real fundamentals of juggling, or that a professional juggler would even need to waste their time with them. When it comes to building your wealth, the same principal applies.
One of the most common questions I am asked at speaking engagements, and interviews is, “If you spend most of your time working with clients on investing and wealth building strategies, why did you write your first book on getting out of debt? Why didn’t you write about wealth building and investing?” I always tell them, “Because my book Defeating Debt is not a book on getting out of debt. It does teach how to quickly and effectively get out of debt, but more importantly it is a money management book. It focuses on the financial fundamentals necessary to get out of debt and for building wealth. It doesn’t matter how much money you make if you do not handle it well.”
We all need to be financially fundamentally sound. Just as many athletes get complacent as they become better players, it is easy for us to become financially complacent as our financial situation improves. The biggest dangers of getting a substantial increase in income is that it is easy to forget about the fundamentals and just spend more without keeping track of what is coming in and going out.
This often happens with rookie professional athletes. Most of them have never made more than a fraction of the money that instantly falls into their laps. Suddenly, they are making so much money, it seems that there is no way they can spend it all, so spend they do… Then comes the off-season!
In the off-season, when they are not getting that regular paycheck, many of them run out of money. Then they turn to credit cards, other veteran players, and other ‘loan sharks’ for short-term loans, with extremely high interest rates. Because of they have not practiced any financial fundamentals, within a few years after they retire most end up broke and many file for bankruptcy.
It doesn’t matter if you make $30,000 a year or $30 million a year, you must not forget the fundamentals of finances. And rule number one is, “Cash-in must exceed Cash-out” Everyone should have a budget and use financial discipline, whether they need it or not, because the easiest way to destroy your finances is to become complacent and undisciplined. Always remember the fundamentals!