$quare 1 with Money

I’m no money manager, so get professional advice elsewhere.  But I have been blessed with a few shekels that I could rub together that has allowed me to learn some of the pitfalls and upsides.  I’ve also been in the business of selling money for the last 25 years, so I’ve had to explain my thoughts on how to make financing decisions several hundred times (but never written in a page and a half). At different times of your life, you’ll focus on different techniques of managing your money.  In general, there are two main factors to think about – cash flow (basically funding your lifestyle) and net worth (basically creating savings and investing).

It’s a Maslow’s thing when talking about money and timing.  If you’re below the poverty line and you get your next incremental dollar, you’ll probably use that dollar to satisfy some of your basic needs – food, clothing, shelter.  If you’re young and on your own and get an incremental dollar, you’ll probably do the same if you earn barely enough to get by.  As you move north of that line of satisfying your immediate needs, you’ll need to figure out what to do with your growing abundance.  So this Letter is more practical in nature.

Immediate Safety Net
If you have debt, I’d limit my savings to 1 month’s expenses as a cushion to handle unexpected events like a car malfunction or parking ticket or medical deductible, say $2-3000.  This will test your ability to leave money in savings.  If you can’t leave a couple grand in savings, then the rest of my advice below is worthless.  After you’ve paid your basic expenses and have accumulated the cushion, then aggressively apply the rest of your paycheck to paying down debt.

This will highlight the difference between cash flow and net worth fairly clearly.  You may have student loans, car debt, and credit card payments. Each has an interest rate and a repayment rate.  The interest rate is the daily rate you are charged for money you owe – say 10% on credit card, 6% on the car, and between 5-8% on student loans.  The repayment rate is the minimum payment required by your debt agreement (expressed as a percentage). It’s somewhere between 2-7%. So if you owe $5,000 in credit card debt and pay $250/mo your repayment rate is 5% even though your interest rate is 10%. The two rates are obviously not the same.  Usually, the lower the interest rate, the higher the repayment rate so they can get you to pay things off faster. Also, the higher the interest rate, the lower the repayment rate so they can get more money out of you.
So here’s the scenario – you’re bouncing along with a job breaking even on your living expenses while paying your student loans, car payment, and a little credit card debt. You get a raise of $500/mo. Do you invest the money in the stock market? Buy a couch for your apartment? Pay off your credit card debt? Car loan? or pay down your student loan debt? Or, screw it, go to Mexico?

There’s several ways to look at it. Your psychology plays the determining role in what the right choices are. What are your goals? Are you sleeping on the floor and don’t want your girlfriend to come over because of it? Are you conservative in using your credit card or do you rack it up to the limit every time?

To decide on what to do with your extra $375/mo (25% taxes) is dependent on your particular personality features. But what I’d do is get a little breathing room on cash flow. I’d promise myself that if I was diligent for a few months, I’d reward myself a little at the end. I’d take 3/4ths of the raise I got ($282/mo) and apply it to the payment that cost me the most cash flow, i.e. the highest repayment rate. I’d focus all my $282 on paying extra on that loan till it was gone. As I said, cash flow is about lifestyle and net worth is about growing wealth. The other 1/4th of the incremental cash flow, I’d save for a couch or that trip to Mexico. So by the time I was up for that next raise, I’d have a bunch of debt paid down and a new couch. But beyond the couch (and here’s the challenge), I don’t raise my standard of living. I don’t go to Starbucks more or out to dinner more. That’ll just eat up your extra cash. You gotta keep your lifestyle the same except for the couch.

The best investment you can make when you’re young and not expected to make a boatload of money in the short run is to pay down unsecured debt (student loans, credit cards, car) and leave secured debt (house) alone. Unsecured debt is lifestyle debt and says the most about your personal disciplines. I have financed guys that make enormous amounts of money who also spend enormous amounts of money. When trouble comes, they’re ill prepared to handle it. Divorces and bankruptcies are commonplace for those kinds of guys. In your life, you will face difficulty – debt will make it worse.

Once you’ve paid down all your consumer debt, put an aggressive path toward paying off student loan debt. A good plan would be to take your car payment dollars and apply it towards student loan debt. Pay off the highest interest rate first. After each loan is paid off, take that payment and add it to one of the others. The key to the whole thing is to delay moving the cash flow to lifestyle until you can actually afford lifestyle. The challenge here is that student loans could last for 7-10 years. You might not want to postpone your lifestyle that long.

Big Point
The world wants you to owe. If you owe lots and lots of money, you are a slave to the machine. You’re just a ATM machine that VISA and the government can just tap into. You’re a coppertop in the Matrix. You are therefore forced to work to pay your debts. So pay off your debt and remain debt free. Free is freedom. The only situations that debt makes sense from this point forward is when buying an appreciating asset (house) or when you invest with positive leverage (for another day).
You can never save yourself to wealth; but you can spend yourself to poverty.  Don’t use consumer debt.

To your economic success,

Dave Marr

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By | January 19th, 2018|Economic, Personal|0 Comments

Audience or Actor

At the peak of my business life (so far), I had 1500 salespeople working for my company. Every year we had an industry event where we would gather vendors to push their wares to our sales people at our own convention. It was fun and offered us the opportunity to design the events to our sales people’s specific needs and interests. I learned a bit about human nature during this time. Our salespeople were 100% commissioned and ate what they killed. Therefore, their motivations correlated to their actions which I conclude determined their income success. You’d think they would be interested in learning how to dramatically increase their income by just tweaking their efforts (not a massive overhaul) and market more effectively. Well, I thought so. So we got our top loan producer who was methodical in his marketing and induced him to create a presentation on his proven methodologies. We heavily promoted this seminar for our event.

The event overall was attended by about 400 people. Huge success. Our presenter had three sold out sessions totaling 120 people. Those interested in a FREE one on one follow up had only to write down his email address and contact him. Ok: Top salesman, proven system, easy to do, subsidized by company, nothing in the way to success but effort. How many followed up with an email? How many? Proven system…FREE, hmm?

Did you guess 13?

Yup, 13 people sent the email. 13!…And only 1 followed up to get the training. That 1 went on to become a top producer which resulted in hundreds of thousands of dollars in additional commissions to her.

This story is classic human nature. There are 119 reasons why those in attendance didn’t take the initiative. Let me propose one big reason: It is human nature to not get involved and instead live on existing momentum. It’s momentum that has a person remain in the audience. It’s easier to stay seated in the crowd and not stick out and look foolish, waste one’s time, commit to an idea not your own, risk being conned or consumed, to re-prioritize one’s calendar, or risk being bold and deal with the consequences of success or failure. In other words, it’s easier to do the same things tomorrow as you did yesterday than to motivate yourself to a new trajectory.

Granted, a few of the 119 were doing ok financially, but the vast majority weren’t. They could have changed their behavior, gotten themselves motivated, and ACTED!!, and reaped more from the same 24 hours in a day. It seemed to me to be a no-brainer. Yet, for them it was more comfortable to be in the audience than being on stage and giving the presentation. They were passive in business and I surmise passive in life.

As you think about your life, how can you take the initiative to disrupt your existing momentum and get out of the anonymity of the audience and onto the stage of your life. Here’s a more direct question: What can you do this month to get on stage and be the star actor in your life?

To disrupting momentum success,

Dave Marr

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By | July 7th, 2017|Economic, Getting Started, Personal|0 Comments

What Men Need – Part 2


Men need to have a positive relationship with money and it’s not sufficient to say that the more money a man has the more positive the relationship. No, the entire history of mankind is replete with stories of the highs and lows of this complex relationship. Obviously the concept of money is soaked in positive and negative overtones and implications. The world is constantly in a money chase with tremendous good and unspeakable evil as result. Insofar as I sell money for a living, I have thought long and hard about money. I’m in the mortgage business and help people buy homes. Except for maybe sex, money is typically the top driver in most people’s lives. While my perspective might not move the needle for you much, I have come to a few insights I think are worth sharing. Men need to understand themselves relative to money.

To Make More, Learn to Be Worth More

Money and value are highly correlated. Not perfectly 1:1, but very closely aligned. The best place to start when trying to gather money to yourself is through value. The more valuable you are, the more money you can make. (Sidebar: We’re talking economic value and not spiritual value or human value. A teacher may be more valuable to the human race than a second baseman, but has to work his/her entire life to generate the kind of income that a professional second baseman earns in one year.That is due to the economic value of rarity, supply and demand, in entertainment. Many people will pay a few dollars to watch a talented player catch a line drive whereas there are many people willing and able to teach in elementary school.)

The takeaway here is that you should align your desires with your value. I just talked with a bank employee this week and he asked my opinion on whether he should become a mortgage lender for a builder. He’ll make a lot more money in commission sales than he’ll earn as a bank manager. But…he’ll work different hours, longer hours, different challenges, and the risk of dry spells. I said that if he were to make the change, he should do it while he’s young rather than after he’s worked himself up the rung and become accustomed to slightly more money and a “more secure” situation where the choice will be harder. (For you young guys, The Defining Decade is a well-written and timely book that illuminates this dilemma.) If economic success is something you want, learn to make the decisions that will increase your value to the marketplace and potentially accrue you more wealth.

Time is Money

Oxygen, blood, electricity, water, and money are all currencies that flow through life to positive effect. You can store each of them to some degree and for limited purposes. They each contain vital elements of power. But only money can store something you can’t capture – time. It takes time to build value and time to exchange that value for money. The more money you can earn and store, the more things you can buy that take time to create. Therefore, in the exchange of your time for money, you only have so much time you can exchange. The more valuable you are, the more your time is worth. When you’re young time seems bountiful, therefore, it’s critical you build value in yourself so that eventually someone will pay you for that value. I used to gauge my income as a multiple of my age. At 24, I made $24,000 = $1000 x age.  At 28, I made $39,000 = $1392. At 35, $6400 x my age. Once I owned my own business, it grew from there (but not always a positive number!).

Your Attitude Attracts Money or Repels It

The third thing I observed about money is that there is a reasonably high correlation between a person’s success quotient and their personal philosophy. A person’s philosophy is the collection of conscious and subconscious beliefs about money, their degree of self love, the influence of their parents and upbringing, their choices about job, marriage, their display of wealth, and thoughts about victimhood vs. ownership.  I think this statement is pretty obvious. What isn’t so obvious is how to identify one’s subconscious beliefs and change them to positive if they’re negative. It’s not readily clear or easy on how to do this. But it’s important that you try because otherwise your marriage, parenting, and happiness could hit a big snag if you decide one day your job sucks because you don’t make enough money, or there’s too much pressure, or your kids’ teeth need straightening and you don’t have that in the budget. In other words, life will happen and you want to be prepared. How do you work on your self-understanding about money? An Ironmen group provides you a forum to hear other’s upbringing and thoughts about success and money and learn from them. It allows you to describe your unique experiences and get feedback. The forum helps you to connect the dots.

Your Understanding is Always Evolving

In summary, money and personal success is a long and complex discussion. No matter your age and maturity, the mountain goes high into the mists of understanding. There’s always more to learn because your needs change. My personal view is that life’s journey had better be valuable to you, that you enjoy becoming ever more valuable and enjoy pouring that value out to others because the pleasure that money brings (and there’s no fooling on this point, it does) doesn’t last.

To your journey towards monetary success,

Dave Marr

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By | June 2nd, 2017|Economic, Financial, Relational|0 Comments