The Millionaire Fastlane (7 page)

Wealth Equation:
My formula for wealth is (Wealth = Income + Debt).

Destination:
What destination? I live for today and I can't be bothered about tomorrow
.

Responsibility & Control:
Everything bad happens to me. The man is keeping me down. I am a victim. It's someone else's fault.

Life Perception:
Live today, to hell with tomorrow. Life is too short to plan any further than 30 days out. You can't take it with you! You're only young once! Besides, I'll hit it big someday.

The Disturbing Sidewalking Facts

While these hypothetical mindposts and their commentary might sound ridiculous, they aren't. Just look at the data. Read the reports. According to a US Census Bureau study conducted in 2000 (before the technology implosion of 2001 and the financial crisis in 2008), here are the disturbing facts:

• A person under the age of 55 is 57% likely to have zero net worth, or negative net worth.
  
• An estimated 62% of all households in the United States have less than $100,000 in net worth.
  
• 89% of all “under 35” households had a net worth less than $100,000.
  
• A person in the 35–44 age range has a median net worth of $13,000 excluding home equity.
  
• A person in the age 45–54 group has a median net worth of $23,000, excluding home equity.
  

In a 2007 Census Bureau survey, 61% of all people who earned income earned less than $35,000/year. This data unmasks the ugliness behind the Botox injections and the luxury German sedans: Sidewalkers are the majority. An estimated 60% of adults live their lives on the sidewalk. Yes, the world is full of financial illusionists.

Once the recent financial crises are factored in, the latest figures will devolve into chilling depths; I estimate that 85% of American families will have zero or negative net worth. But you can bet that they have 650 cable channels streaming into their five flat-screen HDTVs. If you're older than 35 and you have less than $13,000 in net worth let me be blunt: What you are doing isn't working.
You need a new roadmap.

The Standard Sidewalker: Income Poor

“Income-Poor” Sidewalkers are the mainstream populous and reflect the lower to middle class. These Sidewalkers work for modest salaries and possess all the toys to show for it, but have little savings and no retirement plan. Their future is mortgaged to the hilt in favor of a lifestyle, with purchase affordability of any extravagance determined by the monthly payment. Every dime is spoken for: car payments, clothes or is sent to stave off the credit reaper.

If you live this way, you are driving at the financial redline on a narrow road bordering a cliff. There is little hope for Sidewalkers because their roadmap is corrupted by gratification, selfishness, and irresponsibility. This problematic disposition repels wealth and thrusts codependency on overburdened hosts: taxpayers, employers, friends, parents, and loved ones. Income-Poor Sidewalkers rationalize, “Life is short. Get out of my way or get run over!”

Sidewalking Symptoms: Are You on It?

You haven't learned much since graduating from high school or college.
“
I'm done with school, hooray!”

You change jobs frequently.
“
C'mon, MJ, I left because this other job pays more.”

You think people with money have it because they had rich parents, luck, or easier life circumstances than you.
“
I've had it hard. If my parents would have paid for college I could have had a good job. I had a rough childhood. Those people with money have no idea.”

You are easily impressed and seek to impress.
“
I love designer purses, German cars, Italian clothes, and purebred dogs. I work hard for my money and I deserve it!”

You have poor credit.
“
I pay my obligations most of the time … it's just that I can't always pay on time because of situations outside of my control. Besides, the banks and utility companies are big, rich companies-they are the enemy.”

You put faith into politicians and government to change the system, instead of focusing on how you can change yourself.
“
A bigger government is the solution. More regulation, more programs, and more services. The government should serve the people. Rich people should pay more in taxes for their good fortune-they can afford it and I can't!”

You view pawnshops, payday loan stores, and credit cards as a means of supplemental income.
“Groceries can't wait until the next paycheck-my family has to eat! Besides, there's a sale on crab legs for only $18 a pound.”

You have filed for bankruptcy at least once.
“
It wasn't my fault-I overextended myself and didn't expect to lose my job. I didn't expect a recession. I don't feel bad about bankruptcy because it wipes my slate clean and I can start over fresh. I'm already pre-approved for another credit card.”

You live paycheck to paycheck.
“
Wait, doesn't everyone?”

You don't alert a business when they give you incorrect change in your favor.
“
Are you crazy? If a business makes a money mistake, I'm keeping it. It's not my fault their employee screwed up.”

You have a negative net worth and little, if no savings.
“
What's the point? You only make 1% on a savings account anyhow, and look at all those people who invested in the stock market. Suckers! At least if I spend every dime I can't lose it!”

You have no car insurance, no health insurance, and you have unprotected sex with uncommitted partners.
“
What can I say, I'm a risk taker. I know that insurance and birth control are important, it's just not a priority.”

You regularly gamble at the casino or buy lottery tickets.
“
You gotta play to win right? Forget the odds-this time's different, I just feel it.”

You immerse yourself in alternate realities, including Web site celebrity gossip blogs, television, sports, video games, or soap operas.
“
I just love American Idol, Lost, Survivor and Peoples' Court. Monday through Friday from 6 p.m. to 10 p.m., I know exactly where I will be.”

You've lost money on “get rich” schemes.
“
There's got to be an easy way to wealth. If I just buy this program/DVD series/late night infomercial product, I'll have the secret! Get rich easy is out there!”

Your family cringes when you ask for money or you quit asking because you know a lecture follows.
“
Geez, it's just $500. My parents should take care of me until I die. Don't they see how hard I have it? I mean, look at this apartment! The granite countertops need to be replaced!”

Can you identify a behavioral pattern? These mindsets are indicative to the Sidewalk. Hopefully you're not feeling angry or defensive because that might indicate your beliefs are bred from the Sidewalk roadmap.

The Sidewalk's Gravitational Pull: Poorness

A recession is a bump in the road. How many people have lost their homes due to the current economic crisis? Their savings, their jobs, or their 401(k)s? The Sidewalk offers no protection, because you're naked and you can't absorb the hits. If you're hit by traffic, you're road kill. If you want to be unshakable on your financial roadtrip, you have to get tough and strap on a bulletproof vest and have a plan that transcends years, not days.

A life on the Sidewalk naturally pulls you to poorness.
Because the Sidewalk is about the short term, it never works for the long term.
Your future becomes a mortgage for a pleasant present.

Unfortunately, any bump in the road causes the loans of the Sidewalk to be called in: a recession, a job loss, an interest rate hike, a mortgage reset. Living on the Sidewalk can literally end in living on the sidewalk.

If you ask any derailed Sidewalker what spun his financial life out of control, he will quickly blame some external factor: I was laid off! My car broke down! I had no health insurance when I broke my foot! The judge ordered a 20% increase in alimony! When you rev your financial engine at the redline you're guaranteed to burnout. And then, ironically, your pleasant todays turn into horrible tomorrows: more work, more debt, and more stress.

I don't know your age, but let's be honest and ask the uncomfortable question: Can you seriously expect to retire on $13,000 in net worth? Or $113,000? Is it rational to think you can live off your home equity refinance? Have you thought beyond next week's paycheck? At what threshold do you realize that it's time to shift gears and reevaluate? Is there a threshold? Why would something that you've been doing for 5, 10, 20 years suddenly start working? Yes, insanity is doing the same things repeatedly and expecting different results.

The Sidewalk is not a road to wealth unless your strategy is casinos, lottery tickets, or some poison-your-spouse insurance scheme. Government aid, social security, charity, and “my parents will soon die and leave me a fortune” inheritance is not a financial plan! If you don't want to work at Kmart until you're 75 years old or you don't want to retire under a bridge in a cardboard box, you have to have a plan. Should life grant you another 50 years, what the heck is your plan?!

The first step to escape the Sidewalk is recognizing that you might be on it … then replace it with something that works!

Money Doesn't Solve Money Problems

Newsflash:
The Sidewalk is money blind
. It doesn't care about how much money you make. You can't medicate poor money management with more money. Yes, you can look filthy rich and still be riding the Sidewalk dirty.

Sidewalkers come from all walks of life, even those with the visual embodiments of wealth. They own businesses, they work high-paying careers like medicine or law, or they live as successful actors or musicians and earn big incomes. The common denominator remains consistent: There is no plan, no savings-spend more than you earn and trade a secure tomorrow for a “living large” lifestyle of today. A Sidewalker's wealth equation is determined by income plus debt, determined by available credit.

Wealth = Income + Debt

Sidewalkers create their lifestyle in direct proportion to their income and supplement that lifestyle with extensive use of debt. All Sidewalkers stress about paying their mortgage or rent, paying the utility bills, meeting the minimum payments on their credit cards-it's just what happens when there is no thought given past the happy hour after payday.

The Affluent Sidewalker: Income-Rich

When an income-rich Sidewalker goes broke it makes big news. Have you ever wondered how a rich rapper can go broke three years after his last album? Or why a famous actor needs to file bankruptcy a few years removed from the public spotlight? How does one transform an $80-million NBA contract into the oblivion of bankruptcy? I'll tell you: The Sidewalk where wealth equals income plus debt.

You don't have to look hard to find an “Income-Rich” Sidewalker. These are people who look rich, but in reality are one paycheck, one album, or one movie failure from broke. They make large incomes, with every dime spent on the next lavish accoutrement. Their lifestyle is accelerated by a big income and a big credit line. Yes, after their big income is spent, they buy more things they don't need with money they don't have, trusting fully that their large incomes will go on forever.

I laughably refer to Sidewalkers as “all credit cards.” They drive nice cars and wear expensive clothes, but are one blown gasket away from a total financial meltdown.

A member of the Fastlane Forum (
TheFastlaneForum.com
) posted this slice of Sidewalking overhead from a friend who works at a lending agency:

“A famous rapper was denied a loan for $60,000 … despite putting on his application that he was making $400,000 per month … yet, after having two hits in the past year, he must be broke. He also had a terrible credit score. Goes to show you, money management skills and having good credit are very important, even when you are having a ton of success.”

Since Income-Rich Sidewalkers earn big incomes, having designer clothes, accessories, and hobbies are commensurate with their earnings. For example, if an Income-Rich Sidewalker earns $20,000 a month, they feel justified in buying a pair of $300 jeans. The problem is that, just like Income-Poor Sidewalkers, an Income-Rich Sidewalker's spending isn't satisfied until they've burned through their entire monthly income plus some. It's an irrational way to live, as if these people fear that not spending the money will cause it to disappear. Earn $50,000 a month? Spend $60,000. Earn $250,000? Spend $350,000. The money outflow always outpaces the money inflow.

Someone who earns $2 million a year is susceptible to the same Sidewalking pitfalls as someone who earns $20,000!
Financial discipline is blind to income
. Lack of financial discipline resides on the Sidewalk and it doesn't care what you earn or what you drive.

The Income/Wealth Mirage of the Sidewalk

Notice how both income-poor and income-rich Sidewalkers share the same problems but different scenery. The reason is,
more money is not a solution to poor financial management
. Poor money management is like gambling at a casino, because, over time, the house always wins. Tossing more money at the deficiency is like trying to plug a hole in a dam with more water. More money doesn't buy financial discipline.

Those lacking financial discipline misuse money to delay the inevitable. If you can't live on $40,000 a year, you won't be able to live on $400,000 a year. While you might fret about your $900 mortgage payment, the income-rich Sidewalker frets about his $9,000 mortgage payment. The fretting is alike; the problems are the same, only the amounts differ. Only a mindset change regarding money is a solution to money problems. To change your mindset, you must change your roadmap. Get off the Sidewalk and stop equating wealth to income and debt.