The James Dicks Blog

Several years ago, in the best-selling book The Millionaire NextDoor, the authors described the day-to-day lives of contemporary millionaires: what they think, what they buy, their daily habits, and so on. What came through loud and clear was a mindset of success.

Those millionaires next door were recognizable—in other words, in lots of ways, they weren’t all that different from you and me. But they were distinctive in the way they thought about the world, and about their wealth. Not that they were all the same—far from it. But they shared certain kinds of discipline in the way they dealt with the world.

My goal is to help you achieve that kind of discipline, so that you can move from where you are to where you want to be. That means slightly different things for different people—there’s no “one size fits all”—but that is the fun and beauty of financial independence.

Very few things that are of value come easily. But it will be fun—like learning a new sport, taking up a new instrument, or learning a new language—and that is the exciting part. Planning for your financial goals, and then getting there, can be among life’s most rewarding experiences.

The definition of financial independence is different for everyone. For some, it is a substantial net worth, consisting of reasonably liquid assets—say, a million bucks cash in the bank. (Liquid simply means that it’s available to you on short notice. Cash is liquid; real estate is not.) Others tie financial freedom to some level of annual income, like, a million dollars in cash, gross. Still others would raise the bar and say, “a million a year after taxes.” But everything’s relative, and people’s expectations vary widely.

To you and me, a million dollars (in any of these flavors) is a whole lot of money. But to Bill Gates, Warren Buffett, or Donald Trump, a million dollars probably wouldn’t mean all that much.

The moment you start trying to live by someone else’s standards, you’re likely to lose the war, even if you win some shorter battles.  Everyone has their own set of values and principles. Trying to use their financial plan and utilize their financial mind set will lead to disaster.  Build your financial mind set on your values and principals, create a plan that you will want to work.  After all you are planning for your future.

You have heard it before; it’s a lot easier to make money with money. Well it’s true. BUT we all don’t have the means to get rich using our own money, after all if we had a lot of money we would probably not be reading this.

What I learned from my experiences was that financial freedom is as much a mindset as it is net worth. You have to think about financial freedom as a process—not just a goal to achieve, but an activity that you continue, and expand upon, once you have reached your goal. You have to develop a plan, implement specific strategies to make that plan a reality, and then come up with a revised plan.

I have written about this in the past, and it never changes. To create a plan, one that works you must write it down, on paper. This allows you to for a mental process that will embed your plan in your subconscious. By having a plan you can help create the proper mind set to achieve financial success.

I am going to create a few blogs that will add to this as lessons so to speak so make sure you check back during my financial mindset series.

So here’s your first lesson: your mindset is critically important. Yes, making money and achieving financial freedom is important—but getting into the right frame of mind is at least as important. Without the proper mindset, you probably won’t keep the money you make—and even if you do, you probably won’t enjoy it as much as you thought you would, and, after all, enjoying your financial freedom is what makes that freedom worth pursuing in the first place.

I am not writing something that I don’t understand, you can believe me, if there is anything I understand it’s making money and then loosing it, and not because I don’t know what I am doing, but because of unforeseen circumstances. The most recent is our terrible economy. I had a thriving business that took it on the chin hard like most other business have over the last few years. BUT that’s okay, I have the right mental mindset to create and build financial freedom.

Each time you have a setback in your financial plan simply write down your mistakes and avoid them the next time, I know this sounds obvious but in reality if we did this since the beginning we would not be making the same mistakes. I fared much better the second time around with my finances than the first time around when I lost everything. This time around I still made some mistakes but won’t make the same ones again. Will you ever get it right? Great question, no, because you can never predict everything that can happen in your financial life, you just have to learn from your mistakes and build on that. Update your plan and modify it to work within your most recent circumstances.

I wish everyone a very joyous and profitable 2010, but in order to make it profitable, you must start planning. I’m not going to tell you to make resolutions for the New Year (resolutions normally fall by the wayside very quickly anyway), but rather organize and design a positive strategy to actually change your habits and develop individual goals. This kind of action will better secure your success in obtaining meaningful returns in 2010 through a meaningful reorganization of your financial life.

Goal setting is the top priority. Determine specific and attainable goals, short and long term, and make sure you write them down. Physically writing them down gives them power. The act of writing and visualizing your goals makes it much more likely that you will actually achieve them.

You must also understand your current financial situation. Add up your assets and your liabilities. Find out how much you owe on your home, your cars and your credit cards and conclude how best to whittle those liabilities down a bit during the year ahead. It’s always a good idea to get rid of debt, especially high interest debt. The beginning of the year is also a great time to establish any new insurance needs. Examine the validity of your current life, disability, home, health or auto policies and decide whether changes are required.

The best way to create a solid financial plan is to save, save, save. The general rule is to put away 5 percent to 10 percent of your take-home pay, if you can. Remember to pay yourself first and don’t wait for what’s left over after you pay your bills. If that’s your strategy, you’ll find it difficult to save anything. You should also be sure to set aside your savings in an interest-bearing account, such as a money market account, or in a tax-deferred account like an individual retirement plan (IRA). If your company offers a 401(k) plan, start contributing as soon as you possibly can, especially if the company matches your contributions. Once you’ve finished the basics, then you can start examining your portfolio and other investment opportunities.

Something else to pay close attention to is your tax strategy. When you receive your annual W-2s, make sure your monthly tax payments are being deducted at the proper level. The trick is to come as close to breaking even as possible on your federal tax returns. You should keep and invest your money throughout the year rather than allow the government to use your hard-earned cash.

There are an almost infinite number of financial topics to consider but the bottom line is getting the education you need to determine what you need to do to establish a positive financial position for 2010. Go to the library and check out books that deal with the financial issues you are most interested in (plus, you’re already saving money by checking the books out of the library rather than buying them). Subscribe to magazines, listen to radio, watch television programs that explain the financial news of the day and surf the Internet. There are so many top-notch areas where you can find the information you need to educate yourself about your financial situation. You might even take a course at the local community college or university. Remember, it doesn’t matter how old or young you are, now is the time to start improving your financial situation.

Again, I’d like to wish you a Happy New Year! You will increase the chances of experiencing a joyous and profitable 2010 if you constructively plan for your financial future.

Happy Investing!