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RECOGNIZING OGNIZING REALITY
In this chapter, we're going to look at your personal financial situation-where you're at right now. We'll figure out what wealth means to you, look at some hard facts about the economy, and come to a realistic conclusion about what you need to do to put yourself on a path that will allow you to live well and retire comfortably.
But first, let me tell you how I got started on my own road to wealth ...
THE DAY I DECIDED TO GET RICH
It doesn't take a genius to get rich. Nor are special talents required. You don't need to be lucky. And you certainly don't need to be privileged. You do, however, have to make getting rich a priority in your life-and be willing to focus the majority of your time and energy on doing what it takes to build real wealth.
I discovered this early on in my career.
It was 1982. I had just been hired as editorial director for a fledgling newsletter-publishing company in South Florida. Because I had to give the occasional speech, I enrolled myself in a Dale Carnegie course on public speaking. Somehow, though, I ended up in the Carnegie basic success course instead.
The How to Win Friends and Influence People program is a 14-week course in which you are asked to focus on a certain character-changing task each week and then report on your progress the following week.
I was the worst student in theclass. Cynical and suspicious, I despised what I took to be the silly, do-goodish prattle of the teachers. But I'd paid good money to be there, so I grudgingly went along with the program-and I'm very glad I did.
The assignment for week 4 was to come up with a single goal that you would pursue for the remaining 10 weeks of the program. The idea was that by concentrating on only one goal, you could make much more progress than you would with a wider scope of objectives.
Sure enough, I had a hell of a time with that lesson. For me, it was by far the most difficult of the 14.
When I first started listing my goals, I could think of only two or three. But as I put more thought into it, the list began to expand ... first to half a dozen ... then to 10 ... and then 20 ... and on and on. Narrowing down the list was torture. Among other things, I wanted to be a great writer, a wise teacher, an admirable dad and husband, a linguist, a wine connoisseur, an athlete, and more. I was paralyzed. I simply couldn't tolerate the idea of giving up any one of those goals.
Finally, driving to the class at which I was to publicly announce my one main goal, I had a breakthrough. I realized that all my hard work and ambition had amounted to nothing because I had been spreading myself so thin.
Then I had an idea: "Why not make making money my number one goal?" I thought. "If I achieve that goal, I'll have all the money I need to pursue my other interests."
At the time, I knew nothing about making money. I had come from a family of teachers who didn't care much about money or the things it can buy. But I focused on that one goal and made it my priority. And it worked. Big time.
My income started to climb. I had been making $36,000 at the time, and it doubled in 12 months ... and then tripled the year after ... and then kept on multiplying. I developed an interest not only in how money is made, but also in how it is lost and what it can do for you.
I began reading about it, talking about it, asking about it-trying to unlock its secrets. At the same time, the publishing company I was working for was changing its focus from providing information about business and travel to financial planning and investing. And I was fortunate enough to get to know some very smart people who seemed to truly understand how money works and some very successful businesspeople who had demonstrated how wealth is actually made.
This experience completely changed my ideas about wealth. Before my conversion, I felt that money was, at best, a necessary evil. But after I took the time to learn about it, I decided that wealth is actually a pretty good thing-not the most important thing in life, but a good thing that can make it easier to find time for the other, more important things.
THE REAL MEANING OF WEALTH
I remember when my income first broke through the $150,000 mark. Louis, my accountant at the time, was amused by my innocent astonishment at making so much money.
"Welcome to the world of the rich," he told me.
"Come on, Louis," I said. "I'm making barely more than one and a half grand."
"Think of it this way," he told me. "When you have a family income of less than $50,000, it's a struggle. When you make between $50,000 and $150,000, you have everything you need and some of what you want. But when you make more than $150,000, life is good. You can live in a beautiful house in a safe neighborhood, drive nice cars, go out to dinner once or twice a week, and do some traveling."
"But what about the mansions, yachts, and private jets?" I asked. "I still can't afford those."
"Those are just toys," he said. "$150,000 per year is all you really need to live a full, rich life. And here's the interesting thing: This doesn't change in any meaningful way when your income passes $200,000, $300,000, or $400,000. In fact, it doesn't really change until you are making more than a million dollars."
Back then, I only half understood what Louis was trying to tell me. Now, I think I get it completely.
There are four basic income levels:
1. If you have a family income of less than $50,000, it's tough to make ends meet.
2. If you earn between $50,000 and $150,000, you are getting by. Your bills are paid and you can afford some small luxuries, but you have to be careful.
3. When your family income exceeds $150,000, you are living well and want for nothing (unless you have 10 children).
4. When your family income exceeds $1 million, you can spend money without much thinking. You don't need a budget. You can be extravagant.
But making a million dollars does not increase the quality of your life-and it does not, in itself, guarantee that you will have financial security till the end of your days. What it does do is make saving infinitely easier. Because unless you are completely out of control, you will be able to save most if not all of your after-tax income that exceeds the million. And saving is key to jump-starting the Automatic Wealth program.
So if you can get your income above a million, you can get rich, relatively quickly, merely by saving. And that may happen simply by following the advice I'll be giving you in Step 3.
But if your primary income doesn't grow so dramatically, don't despair. You can still achieve financial independence in a relatively short period of time (less than 15 years, certainly; probably less than 7) by developing additional streams of income. I'll tell you how to do that, too.
BEING RICH IS NOT JUST ABOUT HAVING MONEY IN THE BANK
One of the most active discussions that ever appeared on the online forum for ETR, my daily e-zine, was in response to the simple question "What is wealth?" This question prompted a deluge of interesting answers, from the mundane to the pragmatic to the philosophically problematic. Answers like these:
A million dollars in the bank
Having everything you want
The power to command results
Being loved by your family and friends
Having tangible assets sufficient to meet the physical needs of yourself and your loved ones
Having a balanced life
Inner peace and spiritual enlightenment
Excellent health and immunity from disease
This is just a small sampling of what our readers had to say, but it gives you an idea about how varied and sometimes vague our thinking about wealth can be. And although I recognize the sense in many of these definitions, I find it impossible to talk to people about wealth unless I can get them to agree on some basic terms. So let's do that now.
I suggest that we start with this definition: Wealth is a store of something valuable.
I like that definition because it is simple and because, no matter what it is that you value, it emphasizes something essential about wealth: the idea of storage. Having the things you desire-say, a big house and fancy cars-does not make you materially wealthy if you don't have the wherewithal to keep those goods over a protracted period of time. Nor are you wealthy in friendship if the many friends you have now would abandon you if your fortune changed.
The point I'm making here may be too obvious to mention: that wealth is only sometimes about money. Understanding wealth in a broader sense, with implications that go beyond dollars and cents, is essential.
Yes, the main purpose of this book is to help you become financially independent. But you want financial independence for specific reasons:
You want more freedom in your life. You want more choice about where you live, how you live, how much you work, and so on.
You want more leisure in your life. You don't want to feel compelled to work 8 or 10 hours every day, or five and six days every week.
You want more tranquility in your life. You would like an end to the stress that the lack of money sometimes causes. You want to be able to sleep easily at night and enjoy your days without worry.
These goals are wrapped up very tightly in your desire for wealth-and as a result, they are a fundamental part of every step in my Automatic Wealth program.
Let's push a little further along this path and delve a little deeper into the way you think about your life and the things you value.
INTERESTING FACT: Only about one-half of 1 percent of U.S. households have a net worth of $5 million or more, excluding primary residences, according to the Spectrem Group, a consulting firm specializing in affluent and retirement markets. And only 0.2 percent of U.S. households have a net worth of $15 million or more, including their homes, according to the Federal Reserve.
PLAN TO BE WEALTHY IN EVERY IMPORTANT WAY
I'm hoping that money is not the most important thing in your life.
Nevertheless, material wealth does matter. It gives you the ability to help your friends, provide for your family, pursue intellectual and artistic interests, and become an inspirational role model for members of your community.
Plus, if you don't have an income sufficient to meet your needs, you'll spend a good deal of time fretting about it-and when you spend time fretting about money, you can't enjoy the things you truly care about.
This is a truth that more and more baby boomers (including a few of my friends and family members) have recently discovered. Stumbling into middle age with lifetimes of educational, social, and recreational experiences, yesterday's hippies are hitting their 50s with the depressing realization that they are working harder than ever to maintain a lifestyle that is not much better than the one they had in college.
I've had the good fortune to be able to help dozens of such people work themselves out of this sort of bog, regain solid ground, and go on to achieve financial independence. It took some time and it wasn't always easy, but it always began with a revelation-a revelation that was especially bracing for some of the smartest of them-that becoming financially independent is a good thing, something all good people should aspire to.
Having enough money can liberate you from a thankless job, free you to follow dreams, and allow you to take care of your loved ones.
That's the reason you're reading this book.
But never forget that the desire for money can also corrupt you. If, in pursuing wealth, you begin to believe that the accumulation of money is an end in itself-well, that's a bad thing.
This book will help you make money. And if you follow my suggestions faithfully for a reasonable period of time, you'll some day-probably sooner than any of your friends or colleagues-discover that you are wealthy.
But when that day comes, I'm hoping the greed bug will not have infected you. I hope you won't have become addicted to the idea of making the money pile grow. I hope you won't have forgotten what you know now-that there are many things more important than money. (We'll talk much more about this in Step 3.)
FOLLOW POPULAR FINANCIAL GURUS AND STAY POOR
You won't find anything in this book that will give you instant wealth. I have no advice about making a fortune through buying hot stocks, day trading, or playing the lottery. But you don't want that kind of money anyway. Studies show that people who get rich rapidly blow it all quickly on things that have no lasting value.
My six-step wealth-building program is fast-realistically fast. Depending on your age, skills, and current income, I'll get you from where you are today to wealthy in 7 to 15 years. That's not tomorrow, but it's a lot better than you'll do by following most of the financial advice that's out there. Open a magazine or turn on the TV and you'll see that the majority of it falls into the category of financial planning, that is, ways to scrimp and save. Advisers who promote this concept assume you need to crawl toward retirement, clutching pennies until your fingers turn green.
But what about the quality of your life in the meantime? And when you're living paycheck to paycheck, how do you wring a nickel out of your budget for retirement, much less the $5 or $10 per day that these financial gurus recommend?
Getting wealthy is not a matter of scrimping and cutting corners. To make a lot of money, you must spend most of your working time doing the things I'm going to tell you about in this book-things that generate extra cash now that you can use to generate automatic streams of income in the near future. Yes, it is important to be careful about the way you spend your money-but if that's the main part of your wealth-building program, you probably won't get rich. And even if you do, you won't feel rich.
The problem is, most of those doing the preaching-those who would convince you that they understand wealth and can teach you how to get it-have never actually made significant money by following their own recommendations. Their great moneymaking skill is in selling people on buying their ideas.
During my years as an insider in the world of investment publishing, I saw
Financial planning experts who were broke
Stock gurus who never followed their own advice
Brokers who talked about their clients with contempt
Marketers who never checked their facts
Business consultants whose businesses hardly worked
Get-wealthy authors who made their money by talking about making money, not by actually earning it in business
Though it's true that some of my wealth has come from teaching others how to attain it, the vast majority is the result of my actual experience working in the trenches, learning from my mistakes, and capitalizing on my successes.
HOW MUCH WEALTH DO YOU NEED?
Most books on the subject of wealth answer this important question in terms of a concept called retirement. And in today's world, you need a lot of money to retire well. Even people who had their retirement money safely tucked away in the stock market and thought they could look forward to a secure future are now in trouble.
Take Martha Parry, for example. The New York woman sold her insurance company and thought she had it made. According to a Time magazine cover story, she had $1 million in the stock market and was looking forward to a retirement of golf, travel, and good times.
Then the stock market crashed. And now, at 65, she has only $600,000 in her retirement account. And instead of playing golf and traveling, she's still at the office earning her living. And she's one of the lucky ones.
Another woman that I read about had to be put on medication for severe depression because a year after being downsized from her job, she learned her nest egg had plummeted from $1 million to $250,000.
And many victims of the stock market crash have been left in even worse shape.
Tim and Kay Plumlee saw their retirement fund plunge to a mere $60,000 after a broker recommended they put their life savings into a variable annuity-an investment that seemed like a profitable, risk-free opportunity at the time.
Excerpted from Automatic Wealth by Michael Masterson Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
|Step 1||Recognizing Reality||13|
|Step 2||Plan to Become Wealthy||39|
|Step 3||Develop Wealthy Habits||69|
|Step 4||Radically Increase Your Personal Income||103|
|Step 5||Get Richer While You Sleep||167|
|Step 6||Retire Early||237|
Posted February 3, 2006
The world is filled with get-rich schemes and early retirement plans. Michael Masterson¿s book stands out because it blends common-sense advice with savvy investment strategies and a healthy dose of reality. Using personal stories and instructive examples, Masterson provides reality-based insights about achieving financial independence. The chapters on wealth-producing habits and investment diversification are especially helpful, although the multiple sections on real estate investments make the book slightly repetitive. It might have benefited from tighter editing. This is a lively book with helpful suggestions and examples about generating wealth and achieving financial independence. We recommend it to those who seek a healthier income statement, early retirement or both.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted January 6, 2006
I read a lot of personal finance and investing books. Most of the ideas and suggestions in this book, I have seen in other books, but this book lays out the ideas in a clearer, more direct, easier to understand way than any other book I've seen. This is a great book and should be required reading in every high school and college in the country.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted October 10, 2005
Finally, a realistic guide to wealth building! Michael Masterson has a very successful track record and he gives you the step by step run down on what has worked for him and what hasn't. Don't expect to be a millionaire next week... don't expect promises that include get rich quick scams... do expect a fine tuned plan that will require a commitment on your part and lots of hard work. Stop fantasizing about what it would be like to be wealthy and make a commitment to become wealthy.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted October 10, 2005
Tired of sitting back and watching others succeed? Then read Michael Masterson's Automatic Wealth. Automatic Wealth is a quick read but a book you'll want to take you're time studying. As you read this no-nonsense work, you begin to see your confidence rise that you can do this, too. The concepts on investing in real estate alone are worth the price of this book. I have read at least a half-dozen books on the subject of real estate investing and could not undestand a word they were saying. Masterson's fundamental and common sense approach is refreshing and applicable. More than a real estate investment book, Masterson shows in full detail the doable ways to build wealth in 7-15 years. His insights on setting specific and realistic goals and getting up earlier each morning until you've reached your wake-up goal are invaluable for a lazy person like myself. You'll want to read this book at least three times to gain understanding of the little nuances that complete this must-have book. Bradley G. Leesburg, VAWas this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted August 1, 2005
This book actually rates better than Napolean Hills 'Think and Grow Rich' because Michael has accomplished so much as an entrepeneur and is not just writing about the accomplishments of others.So many of these types of books are written by theorist and not actual entrepeneurs like Michael. I can honestly say that from the time I picked the book up till the time I completed it I had added 2 new business's to my Wealth pursuit and both are already profitable. Great read I hope one day to meet you face to face and thank you.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted August 3, 2005
Automatic Wealth: The Six Steps to Financial Independence lays out a clear plan to achieving wealth in 5 to 7 years. I'm following Michael Masterson plan as closely as possible, and it is working. I am also giving the book to my adult children and helping them lay out their own plans.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted August 2, 2005
Practical, straight forward and encouraging advice for those of us who want to rise above the average daily grind. A plan of action with bankable results before I'm ancient. I keep this one on my desk.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted May 13, 2005
I enjoyed the stories relating to other's experiences, but if you currently have a plan that you are follwing please save your time and money. Masterson markets Agora throughout the book and recommends common sense approaches to building wealth. The book reads like an outline composed of notes from his ETR emails. The only wealth being built by reading this book is HIS!Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted April 8, 2005
This has been one of the most inspiring books I have ever read in my life. The practical knowledge and wisdom that Michael Masterson goes over is just phenomenal. There is something in this book for anyone who wants financial independance. I have been following Michaels writings for quite some time and have seen remarkable benefits in myself and my Business. This book is just the Icing on an already delicious cake.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted April 4, 2005
I am a fan of Michael Masterson, and this recent book was a continuation of the great advice he is renowned for giving. I greatly enjoyed reading it, setting my goals, and beginning to work on their completion. This book was a great help to me in changing my life and helping me be much more focused!Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted April 5, 2005
Automatic Wealth is the most important business book I've ever read. It's packed with straightforward advice on how to get from wherever you are today, to a life of abundant wealth - but in a realistic timeframe. Too many other books make wild promises of instant riches, or on the other hand, expect you to scrimp and save for 40 years. By the end of this book, you'll be able to use Masterson's book as your own 288-page blueprint for getting rich in a reasonable seven to 15 years (and maybe even sooner).Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted March 23, 2005
Finally, I've found the simplest, most realistic plan for becoming wealthy in a reasonable time frame. I don't mind the other guys asking me to wait 35 years or more to be wealthy, but Michael shows how it is possible, and likely, to become wealthy in 15 years or less with just a few minor changes and some action. Great stories and examples make his teaching come alive. If it were possible, I'd give this book 6 stars. Now, I'm off to read it again and start putting this into action.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted March 23, 2005
When Michael Masterson put out a call for reviews of his book, Automatic Wealth, I couldn't resist. And it wasn't because of my own concepts of automatic success that I promote in my books, nor was it because I have been his student in his copywriting and wealth development courses. It was because of the quality of his writing, and his level-headed, straight to the point approach to making more money than you probably ever imagined. He gives many vignettes in his book, examples of people he has known, and shows what has worked for them -and what hasn't worked. And he gives a number of vehicles to building your own wealth, many of which are surprisingly easy to implement. From real estate, direct mail, the stock market, consulting, marketing and more, he gives many examples of how to get there. More importantly, he reveals the secrets of motivation, attitude, conscientiousness, drive, persistence and structuring your life around the creation of success. He knows what he is talking about - as a self-made millionaire, he has built multiple financial empires. It is a good read, filled with ideas and inspiration. I highly recommend it, to those just starting out to build their wealth, and to those further along the way. Dr. Ron Dalrymple/Psychologist/Coach/Author of The Inner Manager.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted March 21, 2005
Michael Masterson has been busy for the past three decades doing what so many others of us have been doing....managing a career. In addition, Michael has been accumulating wealth in a pre-designed fashion and unfortunately for those of us without a plan, or perhaps with a poorly designed plan, his book was not ready to be printed until now. All the habits he discusses and the path he directs make sense. Perhaps the 'wine is just now ready' or the 'Professor appeared when the scholar was ready'. Thanks Michael!~ Rex HoodWas this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.
Posted March 21, 2005
I recently met Mr. Masterson at a conference and within minutes of hearing him speak, I knew he was the real deal. I believe he really wants to help others learn and there are plenty of practical lessons in his book. Furthermore, the lessons come from his experiences. I liked it so much, I ordered 12 copies for my collegues.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.