Self Employed or Bust

How Do You Think About Money?

July 28, 2008 – 7:00 am

In The American Wealth Gap I mentioned that I’d come back to the issue of how we think about money, business and investing. I think it’s important to discuss and something we’ll likely revisit often in the future because, at the heart of what separates us from the filthy rich is the way we think about and approach those issues. If we want to be self employed and get rich doing it, mindset is an important thing to assess.

Our parents and, to a larger degree, their parents grew up in a different world. In my lifetime I’ve watched pensions become archaic. The working world they grew up in was very different. Employees and employers formed loyal unions. Employers rewarded loyalty by way of providing for one’s retirement years. Pensions were the norm. Safety and stability were the smart approach. Saving money wasn’t an unreasonable way of going through life. And our parents have tried to pass those same values down to us. Most of us are a product of their mentality.

I like to think that there are very few truly stupid people in the world (despite beltway drivers desperately trying to prove me wrong every day.) Instead, I believe that there are a great many people so firmly rooted in tradition and habit that they don’t always see the truth in front of them. Others are easily blinded by emotion, which is no surprise given the powerful influence our emotions have over us. Others, still, are influenced by trusted people who, despite their sincerity and apparent knowledge, are no better suited to be offering advice than is the recipient.

The point is, though we are not stupid people, we do stupid things because it feels safe and familiar or because somebody we trust (such as a parent) has molded us into a stupid-acting person. They’ve often done so with all the good intentions in the world and it really shines when you consider the way our parents have taught most of us to think about money.

Here are what might be some familiar statements from our parents, grandparents or moral guides:

Money doesn’t grow on trees

All he thinks about is money

Money equates to greed

Money is the root of all evil

You should spend less time at work and more time involved in charity

Your money is certainly appreciated but your time would mean a lot more (when it comes to charitable acts).

Any of that sound familiar? More than words, these are all ways of thinking. Ways your parents or pastor might routinely think and ways in which, as my previous post shows, 80% of us still think today. I hope to show you over the next few days that they are all WRONG ways of thinking. And before you tune out and think that I must be greedy, I intend to also show you how that’s not only the wrong way to think, it’s also just plain wrong. Greed has nothing to do with it. Quite the opposite, in fact. But we’re jumping ahead. Let’s get started.

I want to create two fictional women who are going to take two divergent paths in life. Their names will be Susan and Cheryl.

Susan meets the love of her life shortly after college. He’s a real looker, works a steady job at a stable company and brings home a reasonable salary. They marry a year after meeting and Susan quits her job to start a family. She is a loving, devoted wife and mother. 

Every week, Susan volunteers at the local soup kitchen. Twice a month, she also goes on food drives to collect canned foods from local grocery stores. She also engages in whatever volunteer needs her church may have whenever she can find the time and she instills the same values in her children. She lives to a ripe old age and, when she passes away, leaves her children with a modest house, a little bit of money to divide and $2000 to her church where she was much loved for her participation and generosity.

Cheryl also graduates from college and marries the love of her life. She has a couple kids whom she dotes on but she decides to go back to work part-time when they start school. In her early 30s, she decides to start her own business (doesn’t matter what it is). Cheryl’s business takes off. After a few years she has put a great management team in place to run her business so that she can spend quality time with her husband and vacation with her children. She just needs to check the books now and again and attend monthly and yearly meetings. As the business becomes more established, she has even more free time which she spends organizing charity drives.

By 45, Cheryl is a millionaire and starts another business. With experience under her belt, the startup runs more smoothly. She can afford a strong management team right at the beginning meaning the new venture demands far less of her time up front than her first business. Her charity drives are now fundraisers attended by wealthy individuals who contribute to the tune of thousands of dollars per person. By 55, Cheryl has several businesses managed by exceptional teams and she has instilled her values and beliefs in her grown children.

Each business contributes a percentage of their sizable profits to charitable organizations. Cheryl’s family also contributes to charity out of their earnings. Cheryl also starts a charitable foundation focused on feeding the hungry in her state. With more money than they know what to do with, she leaves a sizable sum to charity in her will with plenty left over for her children (who don’t really need it because they’ve started businesses of their own as their mother taught them) and grandchildren.

First question – Is either person better, kinder, more giving of themselves than the other?

Second question – When Susan goes to sleep at night and when she ultimately dies, do her charitable acts keep giving? When Susan calls it a night so do her charitable deeds. She isn’t serving anybody soup. She isn’t collecting canned goods. She isn’t visiting anybody elderly, distributing blankets or providing clothing and toys to the poor. Her generous $2000 contribution on dying will help dozens for a short time. Her children, though, who have learned from the values she instilled, will likely emulate her and do much the same as she did in their lives. She has left a bit of a charitable legacy behind.

Third Question – When Cheryl goes to sleep at night and when she ultimately dies, do her charitable acts keep giving? She has established several well-managed businesses with charitable partnerships which will live on long after she is gone. She has created a charitable foundation which will also outlive her and continue doing good for others. The large sum she donated to charity has the least value of all because it is finite in nature but it will feed hundreds for several years. Cheryl may or may not be forgotten. Perhaps her foundation was named after her, perhaps it wasn’t. Ultimately, even if she passes into anonymity, her charitable legacy will live on long after she’s gone. Her children, who have learned from the values she instilled, will likely emulate her and do much the same as she did in their lives, representing another legacy left behind.

Fourth and Fifth questions – Susan led a humble life and did not pursue personal wealth while Cheryl did. Is Susan a better person? Is Cheryl a greedy person?

Sixth Question – who do you like more or find yourself emotionally connecting with, Susan or Cheryl?

I don’t want to influence your thinking much at this point. I want you to review both scenarios, digest the differences for a bit and think about those questions and how you personally feel. We’ll revisit this tomorrow in a continuation – How Do You Think About Money (continued)

Stumble it!