By Logan Flatt, CFA
How would you like to live in crushing, abject poverty? Does the idea of living and sleeping on the streets of a major American city sound appealing to you? Would you like to grow old and penniless, spending your final days on this Earth barely getting by on the meager checks sent to you by some large government bureaucracy? Well, my friend, do I have the program for you.
I call my program “Live to Fail Always.” It is a simple, three-step program even you can follow. It is fast and effective. Plus, it is easy to learn. Best of all, you can start applying the program in your own life today! So, are you ready? Are you excited? Alright then, let’s get started by taking a look at the first step of this amazing program.
Step #1: Live A Life You Cannot Yet Afford to Live
This step is so easy. Simply fail to save any money. That’s right, spend every penny you earn on living the good life – today. Do you want to own something you just have to have right now? Well, what are you waiting for? Go buy it! After all, it is yours to be had, so why not just have it? The important thing here is to stay in line with the average American who currently saves less than 1% of his or her personal disposable income. Any money you save above 1% is money that you could have spent. So, go spend it.
Now, to do Step #1 the right way, let me let you in on a little secret: Once you have spent all your income such that you have saved next to nothing, simply borrow money from others so that you can spend even more. At first, borrowing money from others might sound a little challenging. After all, the average American is out there in the economy spending almost every last dime he or she has, so they have no money to lend to you. Well, thankfully, there are companies out there that will give you a little plastic card called a “credit card” that allows you to borrow money from them whenever and wherever you want to spend their money. Just take that little card everywhere you go and charge it up. Don’t worry too much about paying back what you borrowed — you’ve got all the time in the world to do that.
If you are lucky, some credit card companies will allow you to borrow money from them for only 18.9% interest and an $85 fee per year. Importantly, be sure to allow the interest charges to roll over from month to month, year after year after year. Let those compounding interest charges work their magic on you. Still, be careful. You only want to charge up your credit card on things that have little to no lasting value after you have paid for them. Services like restaurant dining, airplane travel and professional dry cleaning are safe bets here. You do not want to buy anything that might increase your personal wealth – the value of what you own minus the value of what you owe. Buying and accumulating items that increase your wealth only delays your reaching the pinnacle of this very special program: bankruptcy.
Bankruptcy occurs when you borrow so much money from others that you cannot go out and earn enough money or pawn enough things you own to pay it all back. In 2006, over 2.0 million Americans reached this pinnacle by filing personal bankruptcy. That is what you and Step #1 are all about: doing exactly what many Americans do, spending all the income you earn plus spending the money you borrow from credit card companies to maintain a certain lifestyle you want to live before you can truly afford to live it. It is an excellent way to fail financially.
Step #2: Fail to Maximize Your Earning Potential
Be sure to keep your income low. Earning too large of an income only delays your need to borrow from others to outspend your own means. After all, if you make too much money, you might run out of month to spend it all. In that case, you would have to put the remaining money into savings and defer the gratification of spending it all today. This behavior runs counter to the spirit and intent of the program.
To keep your income low, avoid asking for raises at work or switching jobs to land a higher salary. If you must ask for a raise, try to give your boss little reason for doing so. For example, do not go into your boss’ office with a list of new responsibilities that you would be willing to take on to the benefit of the company in exchange for a higher salary. Instead, go into your employee performance review with clear evidence that you merely did what you agreed you would do as part of your employment agreement when you joined the company. Then, defiantly demand a raise without offering to contribute anything beyond what you are currently doing for the company. That should keep the raise to a modest level.
Whatever you do, don’t go off and start to generate a second income from your own business that you start in your spare time. The last thing you want to do is have your own business on the side grow so large that you are making more money from it than you are from your current job. After all, why try to make extra money on the side when you can just borrow the money you need from the credit card companies?
Step #3: Always Pay the U.S. Federal Government First
Another counter-productive aspect to starting your own business is that it only reduces and delays your income tax payments to the U.S. federal government. When you own your own business, you only pay income taxes on your profits – the amount left over from your sales after you have paid out all of your expenses related to running your business. Since your business’ profits will always be less than its sales, you will always pay income taxes based on a smaller dollar amount.
In contrast, when you work as an employee, you pay income taxes directly on your full salary or wages – in effect, your “sales” from selling your personal time to your employer — before any related expenses reduce what you pay in income taxes. That way, you will always pay income taxes based on a larger dollar amount. Plus, the U.S. federal government requires your employer to take out your income taxes from your pay check before you can get your hands on your own hard-earned money. Now, that is convenience!
Finally, as an employee, more of the money you earn goes to the politicians in Washington, D.C. This makes sense: career politicians earning six-figure salaries in our nation’s capitol can spend your money much faster than you could ever spend it yourself. It is simply more efficient to give these politicians your money up front. Otherwise, you might be tempted to go out and spend your money on things to improve your own life instead of giving your money to federal politicians for society’s “greater good”. After all, the politicians in Washington, D.C. feel confident that they know how to spend your hard-earned dollars better than you do. Some examples include, but are not limited to, the failed “War on Poverty”, the failed “War on Drugs”, the perpetually bankrupt Amtrak rail service, and other pork barrel projects and federal bureaucracies of little or no value to American society.
Yes, You Can Live to Fail Always!
Even you can follow this easy, three-step program. In fact, if you think about it, you may be following this program already. How can you tell? Check your savings account balance – how much money do you have tucked away for emergencies and investing? Count the number of credit cards you have – when will you have the balance on each of them paid off? Take a look at your job – when was the last time you asked for an increase in your salary or wages in exchange for an increase in responsibility? Finally, look at your most recent pay stub – do the politicians and government programs in Washington, D.C. really deserve so large a chunk of the money you rightfully earn each month before you can even get your hands on it? If your answers to these questions lead you to feel that you are living a life that you cannot yet afford to live, that you are failing to maximize your earning potential, and that you always seem to be paying the U.S. federal government first, you may have stumbled upon my get-poor-quick program already.
Nevertheless, is my program right for you? Indeed, it is not for everyone. Some people do not like being poor. Others simply wish they had a lot more money than they do now. How about you? Would you prefer to have more money than you do now? Would you like to be rich beyond your wildest dreams? If so, you are in luck — you live in the United States of America, the richest country in the history of the world. Unlike in most other countries, opportunities for the average person to get rich are plentiful in America. Real-life, rags-to-riches stories abound. Moreover, financial freedom is a marvelous reality for literally millions of people in America. It could be your reality too.
Yes, You Can Enjoy Financial Freedom!
Do you want to create a reality of financial freedom for you and those you love? Well then, here is a tip: stop following my get-poor-quick program immediately. Stop living a lifestyle you cannot yet afford to live – cut back on your expenses; save the difference; pay off your debts; invest and hold your money in sound, reasonable investments for the long term. Stop failing to maximize your earning potential – ask for more responsibility at work in exchange for higher pay. Do what it takes to increase the amount of money you bring into your household every month. Try to avoid paying the politicians in Washington, D.C. first – contribute to your 401(k) or comparable retirement program at work that reduces your taxable income today and builds up a portfolio of investments on which you can live later in life. Start that small, profitable business on the side that, unlike a job, enables you to pay taxes on net profits, not gross sales. Write your state’s elected officials in the U.S. Senate and the U.S. House of Representatives and tell them you want them to stop wasting so much taxpayer money on unnecessary federal programs so that the budget necessary to run a smaller federal government and the significant taxes they take out of your paycheck every pay period can go down — way, way down. After all, your elected officials in Washington, D.C. are there to serve you, not the other way around.
As you stop following my get-poor-quick program, you will see and feel changes in your financial situation. You will see less and less of your hard-earned money going out of your pockets and checking account to be spent on frivolous services and items of little long-term value. You will see more money coming into your household from better pay at work and from the profits of your small, on-the-side business. You will see your credit card balances and car loan balances decrease quickly, all the way down to zero. You will see less and less of your hard-earned money separated from you in the form of federal income taxes. You will see your savings and investment account balances grow nicely, bringing you long-term wealth, stability, and comfort. You will feel infinitely more confident and secure about your financial station in life. You will feel happy and extremely proud of what you have accomplished financially for you and those you love. Moreover, you will be rich — a little older perhaps – but rich all the same.
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