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Author Topic: Are You Broke or Are You Poor?  (Read 85 times)
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tamo42
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« on: 2011 May 11, 08:22:51 PM »

I was reading the latest Gary North article, and in it he reminded me of a very important point: there is a big difference between being broke and being poor. Being broke is a temporary situation while being poor is a state of mind.

I mean this quite literally.

So what is the difference? It comes down to what economists call "time preference." Do you want what you want right now, or are you willing to save for it and buy it later? Which side of that decision you land on will pretty much determine your financial future. If you can delay your gratification, you have it in you to be rich. You have it in you to forgoe consumption now in order to build capital. Capital is the magical thing that allows money (or other resources) to work for you. The more capital you have, the richer you will become.

On the other hand, if you can't wait and you need your goodies now, then you will always consume what could have been your capital. No capital means no riches. It's that simple.

I've been broke. A couple times. There's one of those "statistics" out there that says the average millionaire goes broke 3 times before he hits it big. Who knows, it might be true. What's important is that those who end up as one of the millionaires are willing to build capital instead of building toy collections. Grown up toys like boats, cars, and houses are extremely expensive.

If you are reading this, then you are at LiveBusinessChat.com, so you are probably smart enough to be able to consume less and build capital. I hope the conversations you find here and on the chat help keep you on that track.
« Last Edit: 2011 May 11, 10:10:40 PM by tamo42 » Logged

badon
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« Reply #1 on: 2011 May 11, 08:58:51 PM »

Oh wow, what a great post this is! It's absolutely fundamental, and doesn't get said nearly often enough. Frugality, patience, and more frugality are the 99% inspiration that goes along with your 1% of perspiration. Seriously, you can have an absolutely average, or even below average income, and still become wealthy if you can follow the advice in this article.

Being impulsive, buying "stuff", and generally not keeping your wealth in your own hands is the only thing standing between you and riches, as compared to your peers. You can't be better than everyone else if you're having as much fun as they are. You either have to have less fun, or more, or a combination of those at different times, but you absolutely must never be the same.

And the beauty of all of this? In the end it translates into LESS work, not more!
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« Reply #2 on: 2011 May 11, 09:04:55 PM »

Thank you Tamo. This is a short but very informative piece. I know people who now make great income & own a home but they are still in the "poor" state of mind. I think the biggest scam of out times is "the american dream of home ownership." Unless you can buy that home for cash, a good percentage of people have no business owning homes.
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badon
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« Reply #3 on: 2011 May 11, 09:59:36 PM »

For the burden of 30 years of debt, I could build a castle one stone at a time...and it would be MINE. Oh yeah, stone is way better than flimsy wood and gypsum board.
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tamo42
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« Reply #4 on: 2011 May 11, 10:07:58 PM »

And here I was thinking that this article isn't very good.

The home ownership issue is a good one. It typifies the desire of people to have it all now. You could buy a piece of land for a couple thousand dollars, build a cob or adobe cottage, spend a bit on power generation and be mostly self-sufficient in a matter of a few months. But everyone wants a "nice" house that comes already done, and they are willing to be in debt forever to do it. It really is forever in most cases with moves and refinancing.

In my own personal life, I'm looking to buy a (cheap) house for cash in the next year, after which will my housing expenses will be reduced to property taxes and maintenance. That will free up my cash flow significantly, so I will be able to save more faster. It really kicks into gear after year 2.
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« Reply #5 on: 2011 May 11, 10:15:45 PM »

This is one of the most interesting construction methods I have seen:

http://en.wikipedia.org/wiki/Rammed_earth

All you need to build the home of your dreams is about 6 square feet of a form-mold, a flat-ended stick, and a big hammer. You can build a structure that will outlast your civilization with that technique, and you don't have to pay anybody for the privilege. It's energy efficient (cool in the summer, warm in the winter), durable like concrete, and you can make it out of what's on your land right now. You can even hammer nails into it!
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« Reply #6 on: 2011 May 11, 10:28:26 PM »

Rammed earth is another good low-tech building method. Cob, adobe, rammed earth, bermed houses, etc are all variations on the same theme. Start integrating techniques like passive annual heat storage, earth tubes, and thermal flywheels and pretty soon you're living for free and loving life!

You might tell I've done a lot of study in this area ;).
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« Reply #7 on: 2011 May 11, 10:30:46 PM »

Speechless. Do you have a sister? :) Ha!
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