Do You Want To Be Rich?

This post originally appeared on the Hermit Haus Redevelopment website on 2020-02-04.

I think it is better to be wealthy than rich. Scales from Shutterstock

This T-shirt captures two popular memes. I can’t make up my mind if it’s brilliant or indecisive. Photo source: Teepublic

Oddly enough, people in the Self-employed and Business quadrants can have a harder time achieving financial independence than those in the Employee quadrant because of higher lifestlye expectations. Society doesn’t expect janitors to shell out for a new luxury car every couple of years. Electricians aren’t expected to have a collection of Lucchese boots. Doctors and small business owners often face those expectations.

I’m in the high-fidelity first class traveling set

I think I need a Lear jet

—Roger Waters

Only you can define your own success, and only once you have defined it can you establish the long-term and interim goals to get you there. So in that spirit, let me ask you a question.

Do you want to be rich?

Not me. I’d rather be wealthy.

When I make that argument, it’s not just semantics. I firmly believe being rich and being wealthy are synonymous only in the broadest sense of the terms. In fact, trying to become rich can be an obstacle to becoming wealthy. Here’s why, being rich is having the appearance of being wealthy. The price you pay for that appearance can prevent you from ever having actual wealth. In appearing to be rich, you spend money on things that make you appear rich. Since you can only spend that money once, it does not go to building your wealth.

In other words, appearing to be rich takes money out of your pocket. Being wealthy generates income, whether you work for it or not.

Spending money is a drug. It releases endorphins in the brain. Endorphins work like morphine or codeine, and they can be just as addictive. When you buy new clothes, the endorphins create a rush of good feelings. People can come to depend on that rush. But as with other drugs, that relief is fleeting and illusory. Soon, instead of making them feel better, people are shopping to get that rush just so they don’t feel bad.

Buying new clothes or accoutrements is not a problem. Buying them when you can’t afford them, or even when you don’t need them is. I know people who spend several hundred dollars a month on clothes. If their wealth generates that kind of income, more power to them. If their jobby job creates the income for this spending or worse, if they can’t afford it, it’s a real problem that can prevent them from ever accumulating the wealth that could make such spending sustainable. Looked at another way, a $500 a month clothes habit, amounts to $6,000 a year. Depending on your market, that’s a downpayment on a rental house every one to three years. The rental house could net you as much as $500 a month in ongoing income.

Cars have always been my weakness in this area. For most of my adult life, a Jaguar XJ has always been my dream car. I bought a used one in the 1980s, but I had to sell it when the cost of maintenance became unsustainable. When I finally bought a new one, I thought I’d finally made it. I felt great driving it around. But as Stephen West observes, “…what actually happens is you get the dream car…then it just becomes…your car at a certain point. Then inevitably…there’s something else that you’re desiring every day.” We are “constantly restlessly striving for things in a perpetual state of discontent.”

That is the real trap of things. They don’t make us happier. They just keep us from being independent. We get caught in the webs of excess consumerism and conspicuous consumption. That Jaguar is a perfect example. At the time, I could have bought a rent house for what I paid for it. In Austin, that rent house would be worth about 140% of its purchase price. If I were to sell the Jag, it would bring about 15% of its purchase price. And clothes are worse. Sometimes we can’t even give away old clothes.

Consumerism is the bonfire into which we throw our hard earned money…and our financial independence. Spending money on mere things may make us feel good at the time—it really does—but it makes someone else wealthy at our expense.

So when you go to the store and find yourself about to spend money, take a second to ask yourself, “What does this purchase help me accomplish?”

Do you need that Lear Jet, or just want one?

Annual Goals, 2020 Edition

A well crafted goal is Specific, Measurable, Attainable, Relevant, and Time-Bound.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-07-00.

It’s been a while since I’ve talked about goal setting, but this is the time of year when we traditionally review what we’ve accomplished and figure out what we want to do next year. So, I thought it appropriate to review goal setting now. Especially since that’s what I’m doing.

Russell has also written on SMART goals, so I’m not going to rehash that topic. Instead, let’s talk about how we actually pick our annual goals.

1. What do you want to do?

My first step is to make a wish list of everything I want to accomplish in the next year—whether it is personal, financial, operational, or spiritual. This is a stream-of-consciousness exercise. I don’t focus on anything except identification of what I want to do. Grammar, spelling, logic, achievability, timing—everything else is irrelevant for this part of the process.

Here are a few of the many, many items from my wish list:

Flip some houses. Make a horse pasture. Renovate the old church as an event center.

Renovate the Gillis house for the Hearts, Homes, and Hands office. Improve our cash flow. Keep all of our businesses profitable.

Spend more time at the ranch. Spend more time with family. Help people.

2. Clarify and combine objectives.

You’ll notice these wish list items are not very specific, and some of them could be grouped together. So, that’s the next step: clarify and combine my goals. For example: “flip some houses,” improving cash flow, and the two renovation goals could be considered parts of the profitability goal. That goal now becomes, “Improve the profitability of the businesses by 10% year-over-year while maintaining a positive cash flow.”

The horse pasture can be combined with spending more time at the ranch and with family. That goal now becomes, “Spend more time with family by working with the horses at the ranch.” Building the horse pasture is an enabling goal for the annual goal. But “more time” is not very specific. Let’s make that “three Saturdays a month” to leave some time for activities other than horsing around.

Finally, everything in the list falls under “helping people.” So, I’m going to call that an underlaying motivation rather than a goal.

Sometimes one task or goal must be completed before another one can start. For example, we have to move the retention pond (big hole) in the foreground before we can put up the fence that needs to go through it. The silage and hay in the distance have to go elsewhere before the horses can be put in this pasture. The rocks can stay where they are.

3. Create a goal hierarchy.

The goal hierarchy helps you understand which of your goals need to be attained in which order and establish their relative importance to you. For example, we have to renovate the old church before we can use it as an event center, and we have to generate rental income from it to improve cash flow and profitability. Also, the businesses have to be making money to enable me to spend more time with my family.

• Spend three Saturdays each month with family at the ranch.
• Build a horse pasture by the end of the fourth quarter.
• Fence the pasture by the end of the second quarter.
• Build stalls by the end of the third quarter.
• Move the hay.
• Move the horses.
• Improve the profitability of the business by 10% year-over-year while maintaining a positive cash flow.
• Generate income from event center rentals by the end of the first quarter.
• Begin renting the conference room by the end of January.
• Renovate the conference room to a rentable standard by end of the first week in January.
• Begin renting the Sanctuary for bigger meetings by the end of the first quarter.
• Renovate the pulpit area by the end of February.
• Complete ceiling demo downstairs by the end of the first week in January.
• Reduce vacancies and leasing expenses by converting all rentals to two-year leases by the end of the year.

By doing this exercise, I reduced nine random wish-list items to two specific annual goals. You should never have more than three to five annual goals. The more goals you have, the less you can focus on achieving any of them. Focus is the key to success.

4. Remove any remaining ambiguity from the list.

You can have some ambiguity in your goal statements so long as you have clear definitions of what the terms mean. For example, “build a horse pasture” could mean a lot of things. But we have specific plans in place for:

Where the fence should go What kinds of fence material should be used Where in the fence gates need to be placed

Where the horse stalls will be located and how they will be made How to get water to the stalls How to light the stalls

Where and how to store feed.

All that’s left is to figure out where the money comes from.

I’ve recently started to use the Free to Focus planner. I find it a lot more intuitive and “focused” than the Covey system. It is one of the things that have me focused on goals right now.

5. Review the timeline to make sure the dates are attainable.

“Attainable” doesn’t mean “easy.” The timeline should cause a little stress. If it doesn’t, you’re probably not pushing yourself hard enough. In business terms, you’re leaving money on the table.

6. Set a schedule to review and revise your goals.

I review my annual goals at least once a week. The priorities shift as the year goes on, and you have to be flexible. For example, a project going seriously over budget can delay other projects and affect the attainment of goals. That doesn’t mean I rewrite my goals weekly, but keeping the goal line in view means I can understand and communicate how projects relate to and affect each other. (Actually, improving this communication is one of my goals for next year.)

I’ve recently started using the Free to Focus planner. That planner requires me to transfer (by hand) my goals from one quarterly planner to the next. That process also gives me an opportunity to clarify and reprioritize my goals. Writing the goals out by hand reinforces them in my mind in a way that typing them into an online planner does not.

In the end, the way you set and track your goals is as individual a process as what your goals actually are. This process works for me. I hope it helps you, too.