The Big Stones
So I have a question for you. Have you read Stephen Covey’s books? I don’t remember which one, exactly, but one of his books tells a simple story about how to fill you life with the right activities. Not getting the right activities in there will mean not getting nearly the results you want in the end - of a month, year, decade or the whole deal.
So if we think about starting at point A, wanting to get to point B, then how does this apply. To keep things simple, let’s call Point B the following: no need to work; savings and automatic income cover expenses - and insurance and other hedges are in place to counteract tragedies.
I would suggest that the first big stone is to increase our assets - our collection of things that have the capacity to make us money. Our education gives us the chance to increase our income from employment - it is an asset. A condo or an office building, if it provides income net of taxes, mortgages, maintenance, vacancy and all other expenses - if the result is a positive cash flow, then it is improving our net worth. With enough improvement, in both raw assets and in monthly cash flow from those assets, we will reach the first plateau of achieving wealth - not having to work in order to maintain our lives indefinitely. The cash flow we have will handle the bills and outflow, and we no longer have to work for money.
Now, this is one of the big stones. I’ll leave to the side other big ones like family and contribution to the world for now. I’m not suggesting that you should leave them out for a period of time - doing that tends to eliminate your family, and eventual financial achievement cannot take the place of a family you have lost due to neglect. We need balance.
What is this ‘big stones’ idea? Well, here is a paraphrasing of the story Stephen Covey shared. If you take a large canning jar and you fill it with the normal things that take up our lives – sand, a few pebbles, drizzle in some oil and then poor in water – you’ll be amazed how much water you can still get in the jar after the other things have gone in. But when you’re done, you’d still have these big stones – the truly important things in life – sitting there lonely on the table.
Do the same thing again, but put the big stones in first. Now add the pebbles. Pour in the sand. Add water. Wow! Putting the big stones in first doesn’t really eliminate much of the other things – they still fit somehow. And YOU GOT THE BIG STONES in there!! That’s the message – put the important things in first. The other details will fit. In 10 years, it’s the big stones that will matter. Get them in there!
So from whatever situation we are in, we need to move towards having the assets and cash flow so that our “ability to pay bills without collecting another paycheck” grows from x months to 6 months, 11 months, 32 months, and eventually INFININTE months.
Keeping this simple, then, we want to find ways to eliminate our large leakages of money. On the other hand, we want to identify those activities that will lead to having those assets that will provide cashflow for our financially free life. There is a lesson I learned back in college while selling books door-to-door for three summers. At first I would arrive in an area and simply look at the houses. From the way the houses looked, I would try to judge the people and their financial situation.
It took a while. But eventually I came to this conclusion: There are people with beautiful cars, beautiful houses, amazing vacations and golf club memberships who are dirt poor. They are living on “financial red line” and everything is just ready to explode in their faces. Although they make good money, it is ALL being spent. It doesn’t matter what it’s spent on - it just is gone. Nothing is left. And this continues month after month.
But then you do hear the stories about little old ladies who never had much, but they ALWAYS saved something. And at some point she started to invest. And she got better at it. Yeah, it might have taken that person 50 years. But at the end of the 50 years, they have 2.79 million dollars of IBM stock and 13 apartment buildings.
The difference in these two is that one feels compelled by social status and other pressures inside themselves so they spend and spend and spend. The other one does without just a bit, and continues to do that. Over time, she’s able to acquire something that helps her progress faster than simply saving will allow. At some point she’s got an apartment building, and things start to progress faster. Maybe it took her 20 years to get the first apartment building. No matter - she is not concerned with what she’s missed out on. She’s concerned with the outcome and with assuring a good future for herself. And she plods on.
So back to us. The lesson I’d suggest from the little old lady that we should apply is this: Do we really need that shiny new car? Do we need the shiny new car with the fancy hole in the roof, the upgraded rims, the 12-speaker stereo? There are ways to save serious chunks of cash by not having some of the upgrades; by acquiring a pre-loved model, etc. Do we really need to take a vacation in France? Could a more local car and hotel vacation be sufficient, and save us perhaps $3000 - or $12,525 over a 2-week period? If we cook steak at home, could we save $250 over going out to a restaurant?
I’m not talking about the “clip coupons and go to the car wash on Tuesdays for their 15% off morning deal”. You can do those things, too. What I’m talking about is learning about our approach to those things that have a big impact on our money. I’m talking about a choice of a $1720 or a $2720 mortgage; a $298 or a $982 or a $1415 car payment; an extra $27,500 club membership - which adds a monthly burden of a couple hundred dollars. Once in a while, just “needing a break” can put a big $8000 dent in our credit cards.
If you look back on the last 5 or 10 years, where does the money go to? The big money. And when have you been able to say no to some nicer, bigger, shinier gizmo and still feel good? At the end of the day, our money comes and goes based more on emotion than most of us realize. When we decide to buy a new vehicle, often we think more about the sunny day driving with friends or family and all those great things that will be possible with the vehicle. We really don’t want to be bogged down realizing that we’re adding a payment that will be with us every month for the next 3, 5 or 7 years. That’s not pleasant. Change channels - back to that sunny day, and the winding road - is that the ocean? Ah…mmm…sea gulls, the beach…
