by Scott Pape - June 24th 2006
Tongue-twisting children’s author Dr Seuss once said “the more that you read, the more things you will know. The more you learn the more places you will go.” This quote comes from his book I Can Read with My Eyes Shut.
This week as I was browsing the business section of my local bookstore I was struck by the number of books that should, in Seuss’s words, be read with your eyes shut.
Titles like From 0 to 130 Properties in 3.5 Years, From Broke to Multimillionaire in Just Seven Years and The One Minute Millionaire.
Actually anything with the words “millionaire”, “rich” or “secrets” tend to rocket up the best-seller lists despite their flimsy foundations.
The problem is that these books are selling the same methods of wealth creation that seminar spruikers use – in most cases they’re the ones who write them.
Ben Stein’s antidote
Just as I was feeling despondent at the trashy titles that become best sellers, I came across a wonderful book by Ben Stein called How to Ruin Your Financial Life.
This book is the antidote to the get-rich-quick phenomenon and explains wryly the quickest ways to go broke.
An accomplished economist, Stein says, “Anyone can write a book about how to get rich. The bookstores are full of them. They rarely work, though, which isn’t surprising since the people who write them rarely know much about money.”
Legal loopholes
While financial advisers can be sued for pretty much anything these days, the corporate cops ASIC take a different view with the written word.
They confirmed to me that anyone can write a book chock full of financial folly without fear of retribution because they are classified as “educational aids”, not direct advice.
This newfound legal loophole is an excellent opportunity to pen my own advice on how best to ruin your financial life.
Stop saving
The first step is to give up on saving money, just like the rest of the country has. Socking money away for a rainy day is very un-Australian – an outmoded concept of a bygone era.
Don’t pay with your own money
In the new economy if you want to get rich, it’s all about ramping up the risk and using OPM, which stands for Other People’s Money.
In our sophisticated economy there is little excuse for paying for anything with your own money.
The Queen doesn’t carry cash, and neither should you. Get yourself another credit card, and this time, make sure it’s a status symbol like platinum or gold.
Although these cards attract a yearly fee of hundreds of dollars, the 7-Eleven attendant is sure to be impressed.
Spend, spend, spend!
Always use a 12-month interest-free loan when shopping for consumer items, and if your mobile phone bill is under $150 a month you’re obviously in need of a personality bypass – try harder.
Think ring tones, music downloads and picture messages.
Get yourself a gas-guzzler
If you haven’t already done so, trade in that embarrassing bomb for a new shiny gas-guzzler. A BMW or Lexus 4WD is essential when confronting skittish suburban roads, and most manufacturers have easy payment plans.
Don’t get sucked into getting any insurance on the car. It’s better to invest that money on the leather trim and heated mirrors you really need.
This advice may at first seem a little reckless, but as the saying goes, if you spend all your time pinching pennies you’ll miss the dollars.
Budgets are for common people with JOBs – Just Over Broke.
Rules for the rich
The rules are different for the rich, and they do indeed have secrets that they don’t want you to know. They’re laughing at you now as you hit the alarm and head off to work, while they sip a latte and live the good life.
Investing is the key to riches, but not the buy-long-term-and-diversify propaganda that’s designed to keep the great unwashed working. The rich understand that in the long term we’re all dead, so the key is to make money, lots of money, quickly.
The best way to do that is property, closely followed by day-trading stocks.
Property profits
Let’s deal with property first. This is where the rich make their millions.
If you’re lucky enough to have paid off your home, take that money out and use your “equity mate” to gear into investment property. Target inner-city apartments, they never lose their value.
The central key to this concept is to use OPM. Always take out an interest-only loan where you don’t actually pay any money back.
Savvy investors usually buy apartments with a deposit bond – in effect this is a deposit for a deposit.
Sure it ramps up your risk but real estate agents tell us they double every seven to 10 years, so buy as many as you can. Use the book 0 to 130 Properties in 3.5 Years as your guide.
If you buy one you’ll do OK, but if you buy 130, you’ll soon be able to get your hands on that Pacific island you’ve had your eye on.
Hit the market
With the excessive profits you make from the apartments, you’ll want to dabble in the market, if only as a means for providing entertaining after-dinner conversation like “I made an easy $100,000 trading interest-rate forwards in New York last night”.
The truth is that it’s ridiculously easy to make money by doing very little. Don’t let the fact that you know nothing about these instruments deter you.
Always use a margin loan (OPM again), and focus on complex financial instruments that can make (or lose) you millions.
There are all sorts of courses that you can do that will show you how to hit the big time by day-trading shares, options, futures, commodities or exotic foreign currencies. Most cost $10,000 or so, a bargain when the knowledge will make you millions.
Also, if you get a call out of the blue from a stockbroker from Switzerland take the recommendation seriously.
They may have cold called you on a Tuesday afternoon with an enticing offer of huge returns from a hot stock but don’t let that deter you. Over the past six years savvy Australians have sunk $400 million into these deals.
If you follow this advice you will no doubt be seriously rich. In which case there is no shame in going to a professional to arrange your financial affairs. Remember rich people rarely pay tax, that’s something levied on the poor working class.
The best course of action is to go to a financial planner and ask them for a free financial plan.
Explain to them that you don’t want to be sucked into paying for their advice upfront. Rather you’re happy for them to take a few percent off the value of your investments in the form of trailing commissions.
Make doubly sure they get you out of your industry super fund and into a flashier fee-paying equivalent.
By following any or all of these rules you’ll be broke quicker than you ever thought imaginable.
If you get really good at losing money, perhaps this will qualify you one last shot at financial freedom – writing your own get-rich-quick book.
Tread your own path!
Photo: http://www.flickr.com/photos/mdezemery/295687769/
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