Good Read on Money

Good Read

Start an IRA. Max out your 401K contributions. Pay yourself first. There is no shortage of advice on the Internet about how to manage your money. So much, in fact, that it's easy to lose sight of the forest for the trees, assuming that lasting prosperity and, ultimately, happiness are indeed your forest.

Well, I decided a long time ago that I wouldn't take weight loss advice from my couch potato pals. By the same token, I'd rather take my financial advice from a wealthy-and-happy person. Stacy W. Johnson, the founder and publisher of Money Talks News and author of Life or Debt 2010: A New Path to Financial Freedom (Simon & Schuster, 2010) left his Wall Street job 20 years ago to create his own financial education company, and has been financially independent ever since.

At the prodding of a colleague, Johnson recently published his 10 Commandments of Wealth and Happiness:

1. Thou shalt live like you're going to die tomorrow, but invest like you're going to live forever. Johnson encourages readers to enjoy the experience of living fully, as though every day might be your last. But it probably won't be, so he also urges readers to save and invest for the long term -- and without obsessively fixating on the ticker tape. That, Johnson explains, is what causes people to trade too often, never having the benefit of long-term growth. Johnson points out that had he traded the Apple stock he bought in 2002 every time the media analysts said to, he would have lost out on the 3,800% appreciation it has experienced. He says the same goes for real estate, Buy for the long term, hold and don't sell just because you hear someone on TV say the sky is falling.

2. Thou shalt listen to thine own voice above all others. This one is Johnson taking you by the shoulders, shaking you violently and crying, "Don't do it!" The occasion? Anytime anyone promises they hold the key to getting rich quick and that they'll share it with you for a small fee. From infomercials to Internet scams, Johnson says not to send your hard-earned cash -- to pretty much anyone.

3. Thou shalt covet bad economic times. "Wealth is created when times are bad, unemployment is high, problems are massive, everybody's freaking out and there's nothing but economic misery on the horizon," Johnson believes. Because the investment vehicles in which you can make the most money -- namely, stocks and real estate -- cost so much less when the market is down, to become wealthy, you should shift your viewpoint to seeing recessions as opportunities.

4. Thou shalt not work. This one is more lifestyle advice than financial advice, per se. Johnson isn't saying that jobs are bad; he's just advising you to only while away the precious moments of your life doing work that you love so much you would do it for free.

5. Thou shalt not create debt. Johnson maps out two roads to financial freedom. The first? To make so much cash you could never spend it all, Oprah/Buffett-style. The second, much more easily obtained path is to stay debt-free. Johnson pooh-poohs all the hand-wringing and analysis that goes on around what sort of debt is good and bad, saying "there's way too much analysis and mystery around something that isn't at all mysterious." Borrow only when you have no other option or when the item you are purchasing will appreciate by more than the interest you are paying, and you'll remain free of being a slave to debt.

6. Thou shalt be frugal, but not miserly. It is possible, Johnson believes, to save money without sacrificing happiness, and it's up to us to carve out that balance. He advocates using the web to live at the same quality of life, while saving money, using things like house swaps for vacations, library downloads instead of buying books and watching TV online versus paying for subscription cable. (Who knew libraries even had free e-books? Go figure!)

7. Thou shalt regard possessions not in terms of money but of time. By Johnson's reckoning, that $200 cashmere sweater actually costs you a day of your life if you earn $25 an hour. Time is the only resource we possess that is truly limited and non-renewable, so since spending money is essentially spending the time it takes us to make that money, we should only do it when what we're buying will create true enjoyment -- and not at all frivolously.

8. Thou shalt consider opportunity cost. To continue exploring the time/money connection, the $200 sweater not only costs you the day it took you to make the $200, but also the potential interest you might have earned had you invested the $200. Johnson vividly paints the picture of all the opportunity costs we incur with needless purchases, by advising readers to take inventory of all the junk they have around their homes, total what they paid for it all, multiply that by 7 and, voila-- you have the amount you'd have had by investing that cash at 10% interest for 20 years, rather than buying the stuff you're now boxing up to give to Goodwill.

9. Thou shalt not put off till tomorrow what thou can save today. Johnson joins the overwhelming chorus of financial advisers decrying the evils of procrastinating when it comes to saving and investing, or anything else you count as part of your personal wealth-building plans. He illustrates vividly how the $5 you spend on coffee or snacks everyday can turn into hundreds of thousands of dollars if you learn how to save money and invest it on a regular basis.

10. Thou shalt not covet thy neighbors' stuff. OK, so this one was borrowed from the Good Book. But Johnson does echo the Biblical rule against lusting after your friends' and neighbors' material goods, less on moral grounds than because he's witnessed the effort to keep up with the Joneses cost his readers dearly, without even creating any of the happiness that comes from deciding what you do or don't want and aligning your spending accordingly.

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