Friday, April 17, 2009

The Secret to Financial Well Being by Mike Tyson

Every bit counts
"Yachts? Six homes? That’s more luxurious than what most of us get to enjoy, but it’s nothing compared to the spending done by Mike Tyson. He might be the most well-known fighter of his generation, but if there was one thing Tyson was better at than boxing, it was spending money. In 2003, he filed for bankruptcy after his debt reached over $27 million, about half of which was to the IRS. What was he spending all his money on? For starters, two Bengal tigers for $140,000, for which he also had to pay a trainer $125,000 a year. But that was just a drop in the bucket. There was also the $4.5 million he spent on cars, and perhaps the most inane purchase of all, a bathtub for his first wife, Robin Givens, at a cost of $2 million."
Financial advice from athletes

The difference between these numbers and what I (or maybe you) deal with is huge. While I worry about small change, these athletes are squandering away millions. But there are fundamental similarities when you consider the financial playing field.

Lesson #1 - It is not about how much you make.
Millionaries can and do go broke. There is no financial tenure you can achieve which will make you immune from losing some or all of your financial fortune. Making more money allows you to have a wider margin of error but if you make unwise financial decisions like buying a home you cannot afford or buying more homes than you can afford - you lose.

Lesson #2 - What matters is how much you save.
Families with average salaries save enough to lead a comfortable life - so it is doable at most levels of income. You need discipline, a stong will and the desire to be financially independent but consuming less than you are making is the one and only way to build your egg nest.

Lesson #3 - What do you do with your savings?
You have to make your money work for you. Compounding, growth, inflation, returns, risk all go into this segment of financial management but smart choices can put on the fast track to financial freedom. Bad choices are akin to "Go To Jail" card in monopoly - you pay a fine and start again.

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