Last updated on September 11th, 2020 at 11:47 am
Affluence
This “Affluent Dad” series of posts will be the 2nd area on which Rad Dad Pad will focus. The first series, “Rad Dad,” and the 3rd series (which is coming soon), “Fit Dad,” are all interrelated. Life is a constant struggle for balance, especially as a father. You juggle a number of responsibilities every day. However, though Rad Dad, Affluent Dad, and Fit Dad are all different areas of focus, there are overlaps as well. For example, in a future Rad Dad post I may focus on goal-setting. Well, those fit right in line with what I will discuss in future Affluent Dad and Fit Dad posts as well. Now that I’ve provided a map for what you can expect in future posts, let’s begin learning how to become an Affluent Dad.
“Affluence” is defined as an “abundance of property; wealth.” If you are like me, then you think about wealth… a lot. And accumulating wealth, like politics, is something about which virtually everyone has an opinion. Family, friends, co-workers, neighbors, and any number of influencers on the internet (to name just a few) have an opinion on how you should save and invest your money. Some of these individuals are more qualified than others. But at the end of the day, you know your situation the best. However, even though you know and understand your life situation, how confident are you that you are making the correct financial decisions to care for yourself, your spouse, and your children? Look, I get it that you might not consider yourself to be an “Affluent Dad” yet, but it is critical that you understand money and what it takes to build wealth… your family is depending on it!
Do you remember the first time you held your newborn child in your arms? If your experience was like mine, it was sacred and unforgettable. I also remember the overwhelming weight of responsibility settle upon me – the pressure to care for this new baby boy. Both of our boys were born five weeks early. So, though we knew they were coming in the near future, we did not know that they would come by surprise (well, I guess we had a better idea when our second son came). Overnight, my wife and I had the responsibility to feed another mouth. And among the challenges that faced us, we immediately began to think of our son’s future.
There is something about a new challenge that brings added focus and purpose to life. My wife and I immediately opened “high-interest” savings accounts at our local credit union for each of our boys the month they were born and began contributing to these accounts monthly. We became gazelle intense and paid off our Honda CR-V within the first 12 months of owning the car. And finally, we refinanced our town-home, got a lower interest rate, and switched from a 30-year mortgage to a 20-year mortgage to pay off debt faster. Perhaps we would have done all of this (besides the savings accounts for the kids) anyway, but I believe our focused effort was influenced by the birth of each of our boys. The pressure was on and we rose to the occasion.
Data
I will speak more of our financial journey in future posts… And just so you’re aware, we have made our fair share of mistakes (and I’m sure we will continue to make mistakes in the future). But for now I’d like to discuss some eye-opening statistics:
Emergency fund: a CNBC article from January 2019 revealed that “just 40 percent of Americans are able to cover an unexpected $1,000 expense, such as an emergency room visit or car repair, with their savings.”
Credit cards: Debt.org (America’s Debt Help Organization) reported that “on average, each household with a credit card carries $8,398 in credit card debt.”
Living longer: the Long-Term Care Poll found that “between 2013 and 2018, only about a third of those age 40 and older say they have set aside money to pay for long-term care expenses like nursing home care, a senior community, or care from a home health aide… Many expect to rely on Social Security to pay for long-term care, but these [long-term care expenses] far exceed the average monthly Social Security benefit.” Additionally, the U.S. Department of Health and Human Services reported in October 2017 that “someone turning age 65 today has almost a 70% chance of needing some type of long-term care servicesĀ and support in their remaining years.” As the average life expectancy continues to increase, long-term care will be needed even more in the future.
Part of my purpose in writing this “Affluent Dad” series of posts is to address these statistics and other trends and to write my thoughts on how to overcome them, but I will also focus on positive data that should provide hope to those who struggle with money. For example, findings in the popular 1990s book The Millionaire Next Door indicate that virtually any American can achieve financial independence by following some simple steps… (Let me give you a hint – it doesn’t matter how much you make but rather what you do with what you make that leads to financial independence). I hope that this post and others like it will inspire you to make positive changes in your life to achieve your full potential and become an Affluent Dad.
Financial Literacy
“Financial literacy is the education and understanding of various financial areas including topics related to managing personal finance, money, borrowing, and investing.” (Investopedia) It seems to me, based on the statistics above, that there is an ever-growing need for all Americans (and especially dads who are caring for a family) to become more financially literate. Don’t get me wrong – I completely understand that life can be unpredictable. In fact, some of the most predictable things in life are what we mistakenly label as “unpredictable.” At some point, your car is going to need some repairs (and if your experience is like mine, those repairs will be more costly than your mechanic originally estimated); your furnace will need to be replaced; your cavity will need filling; and the list goes on and on. Life is predictably unpredictable. If you don’t have a plan for the predictably unpredictable occurrences in life, then you are setting yourself up for failure.
I wish I had read more books about money in my early twenties… Now that I’ve entered my thirties, I’m not going to make that same mistake. If I had read books like The Total Money Makeover by Dave Ramsey, The Richest Man in Babylon by George S. Clason, and Rich Dad Poor Dad by Robert Kiyosaki when I was 25, just starting my career, I would be in a much different position now at the age of 30. These three books all have a slightly different approach to building wealth, but I believe that there is more than one way to build wealth. In fact, one approach could work for one individual while it could fail for another individual. The key is to have a plan. Any plan will be better than no plan at all.
Affluent Dad
So, what is your plan to become an Affluent Dad? If you haven’t already read the three books I mentioned in the paragraph above, I would recommend starting there. I would also recommend checking back in to the Rad Dad Pad periodically for additional thoughts and ideas. Personally, I am motivated everyday by my journey to build wealth. There is nothing quite like looking at your bank account, or your business, or your stock portfolio, or your current net worth, or all of the above and thinking to yourself: “Wow, I came into this world with nothing, and with God’s help, hard work, and a lot of learning, my wealth is starting to grow!”
I like to think of building wealth as a journey by freight train… In the beginning, a tremendous amount of energy is expended for what seems to be a small gain. Then, as that same energy continues to be applied, the train begins to gain momentum. At some point along the journey, a minimal amount of energy is needed. Note, however, that energy is still needed. However, because the train is already in motion, and because energy is still being applied, the train will proceed forward at a steady pace.
In The Richest Man in Babylon by George S. Clason, Arkad (i.e., the richest man in Babylon) has a great desire to build wealth to “claim [his] share of the good things of life.” Early in his life, Arkad asks the money lender, Algamish, who was a very rich man, how he could also become rich. Algamish’s response was: “I found the road to wealth when I decided that a part of all I earned was mine to keep… It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first.” Algamish leaves, Arkad determines that he will try it, and so he begins to save. In the beginning, his 10% was small. It required great discipline. Arkad was tempted to spend his growing savings, but fortunately he “wisely refrained.” Unfortunately, however, Arkad makes a bad investment and loses all that he had saved during that first year. However, Algamish encourages Arkad to start over, which he does, and in time his savings begin to grow as he diligently sets aside his 10% and makes wise investments. After four years, Algamish asks: “Arkad, hast thou yet achieved the wealth thou dreamed of?” To which Arkad responds, “Not yet all that I desire, but some I have and it earns more, and its earnings earn more.” My interpretation of this story is that it will take time and effort to build wealth. If you are looking for an overnight solution to become wealthy then you won’t read about it on the Rad Dad Pad. But if you are someone who is willing to exercise discipline and learn various ways to build wealth, this is the place for you.
Think about it this way… we would never say: “Look at that enormous freight train trying to pull away from the platform… it is expending so much energy, I honestly don’t think it’s worth the effort! Why doesn’t the conductor just quit this charade and figure out some other way to travel?” Of course not! We know that the energy expended is going to eventually allow the train to gain enough momentum to leave the platform, accelerate, and ultimately make it to its destination. Even if something happens to the engine, mechanics on hand will fix whatever is wrong and get the train back on track. This is the same with us. When our children are saving pennies, nickles, and dimes (i.e., their 10%), we might be tempted to say: “What’s the point? Why don’t you just spend those coins and enjoy life? You can figure out another way to become wealthy.” No, if you’re like me, wishing now that you had begun saving 10% of all you make and investing it wisely from an early age, I think it would be better to teach our children (and to discipline ourselves, no matter where we are in life), to start building some momentum today. Don’t delay. If you choose to act, then, as one of my favorite authors, Brian Tracy, often says: “eventually you will begin to feel unstoppable.”