Serendipitous Reader

During the late 80’s I was a college student with a large portion of my investments in Savings and Loans. Having spent much of my time working and managing small businesses during my college career, I understood some basic principals of finance. Therefore, I could not understand why banks loaned money to people at over 100% of their home value.

Recognizing this lending practice as a problem, I decided it was time to discontinue investing in Savings and Loans.  Then the S&L crisis hit and I was glad to no longer be involved in the market.  Since most of my money was in cash I was able to purchase stocks and other products at a much lower cost.

The savings and loan crisis was an important experience for me because I learned a valuable lesson.  Recessions allow those with money in the bank to buy at bargain prices. Recessions are similar to clearance sales where you can buy businesses, cars, or homes at a big discount.

Using a simple principal that tells me to only invest in what I understand, I was able to get out of the stock market during the dot com bust and the current economic down turn because I did not understand either market.  Some of you have been caught in the current economic downturn, and I would like to share with you simple financial principals which helped me increase my net worth over 10 times in the past 8 years, including the current recession.

1. Self Reliance

First, the best person to rely upon for your financial success is yourself.  You are the one who determines your wealth and your income.  If you make proper choices and take action, you can turn an economic slump into a financial boom for your personal finances.

2. Don’t believe the “experts”.

Second, listen to the financial experts, both personal and in the media, with great skepticism.  You must rely upon yourself to understand what is best for your financial situation and then apply your own principals.  If you don’t understand an investment don’t risk your money.  Take the time to learn everything concerning the stock, real estate, or other investment you might put your hard earned money towards.

3. Save more than you earn.

Third, to increase your net worth you must spend less than you earn and invest the rest.  When you invest your money you must invest in what you know. For some of you that might be a simple savings account.

4. Check your progress.

Fourth, consistently check your progress on the path towards financial success.  It is interesting how we spend more time planning parties and vacations than we do planning our financial future. Take time to look over your financial goals and your results monthly.

These are basic principals I use to move towards increasing my net worth. To implement the above strategies certain financial concepts must be understood which will help answer the following questions; What is wealth and net worth?  How do I increase my net worth and my wealth?  Why are many of the economic experts on TV wrong and why?

Read my next series of articles to get the answers to these questions and more.  They will help you move towards financial independence which will enable you to be a more willing participant in the next recession.

For More Information:

The Savings & Loan Crisis

Having observed and worked with wealthy people and people with high incomes I have discovered it is not only how much they make, but how much they save that determines their wealth.  The book, The Millionaire Next Door, proves this point and teaches us how these people actually acquired their wealth and how they are able to retain it.

This book is for two types of people, those wishing to become wealthy and those who are curious in learning how the wealthy work, what they own, and how they play.  You are in for a true surprise when you discover that not all of them are members of country clubs and purchasers of luxury cars. These are places and things that are for those who want to feel wealthy not necessarily for those who are wealthy.

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As a child my family vacationed at the rustic and serene island resort area of Hilton head Island, South Carolina. One of my fondest childhood memories was crabbing at the concrete seawall surrounding the quaint village of Harbor Town.

Fishing for crabs is a simple sport and is quite rewarding. The hoped-for result is a bucket full of crabs and ultimately a sweet and succulent meal. Each feisty little crab seems like a precious treasure on the end of a string.

Early on I discovered crabs enjoy eating chicken as much as I did, so my brother and I would stop at the grocery store for some pieces of fresh chicken before heading off to the seawall. After tying a morsel of chicken to the end of the string, we would toss it out into the water and wait a few minutes, hoping the crabs would take the bait. Slowly we would pull the string in hand over hand until the chicken would reach the surface.
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