Thoughts on Leadership: A Money Makeover

This week my travels first found me in West Orange, New Jersey, celebrating Jordan Baris Inc, REALTORS^® Real Living with members of our HSF Affiliates team, including Allan Dalton, CEO of Real Living Real Estate; Tricia Kobos, manager, Business Consulting; Teresa Palacios Smith, vice president of Diversity and Inclusion; Rosalie Warner, vice president of Network Services; Champ Claris, director of Franchise Sales and of course, Ken Baris, president of Jordan Baris Inc, REALTORS^® Real Living. The 67-year-old, full-service brokerage is led by Baris, one of RISMedia’s 2019 Real Estate Newsmakers, and will be a fantastic addition to our Real Living network.

As it happened, my New Jersey visit was followed by a train ride down to Washington, D.C. for the REALTORS^® Legislative Meetings & Trade Expo, where all 2019 Newsmakers would be honored. In his RISMedia Newsmakers writeup, Baris told the publication: “I am energized by frequently sharing ideas with other industry leaders.”

In the spirit of sharing ideas, I want to share a few from one of my favorite books on personal finance, “The Total Money Makeover: A Proven Plan for Financial Fitness” by New York Times best-selling author Dave Ramsey. In a succinct and easy-to-understand manner, Ramsey provides simple ways to achieve financial freedom. Here are 10 key ideas from his book and as a disclaimer and reminder, please consult your financial advisor before making any changes:

1. Ramsey has a personal motto: “If you live like no one else, later you can live like no one else.” His tips are far from easy; they may even be a bit emotionally painful, but his point is that the delayed satisfaction you’ll receive from making strategic financial moves now will benefit you tenfold in the future. There are no shortcuts in the Total Money Makeover. You cannot be mediocre and still find overwhelming financial success. Ramsey writes: “It might seem cliché, but that’s because it’s true: The enemy of ‘the best’ is not ‘the worst.’ The enemy of ‘the best’ is ‘just fine.’”
2. There’s a difference between looking good and being good. Looking good is driving a nice car that will impress your friends. Being good is putting a plan in place to have more money than you’re spending. To achieve personal financial freedom, you may need to sacrifice public perception.
3. Consider buying over leasing a car. Ramsey quotes Smart Money magazine, which reported a statistic from the National Auto Dealers Association (NADA) that the average new car purchased for cash makes the dealer an $82 profit but if a dealer can get a customer to finance the same car, he or she makes an average of $775 per vehicle. (Did you know, Ramsey says the average millionaire drives a two-year-old-car with no payments? If you read or listen to his book, you’ll come to find one of Ramsey’s most prevalent suggestions for financial freedom is to purchase a used car or even a new car with no monthly payments.)
4. To curb your spending, use cash whenever possible. “It hurts when you spend cash, therefore you spend less,” Ramsey writes. While we may have no sociological connection to the piece of plastic that is a credit card, we are taught from childhood to understand the value of a dollar. (I often tell the story that when I first started out in real estate, I had just a $1 bill in my pocket. This way, if I had to take a client out for coffee, I knew I could at least cover the cost of that cup.)
5. Remember: debt is not a tool for financial freedom. Ramsey says, “Your largest wealth-building asset is your income. When you tie up your income, you lose. When you invest your income, you become wealthy and can do anything you want.” If you’re an independent contractor reading these words, you’ll note this is where all the personal improvement we talk about in Thoughts on Leadership posts comes into play. When your income is dependent on your customer service, discipline and skills, your raise gets effective when you do.
6. In the quest for easy wealth, we all lose. There is no get-rich-quick scheme. To create sustainable financial freedom, we must make small, atomic changes—see our habit-building posts for the month of April—to enjoy big results. There is no microwave dinner or instant coffee for financial freedom.
7. Whenever possible, prepay for items. Ramsey writes: “When you prepay something, your return on investment (interest) is the amount the item will go up in value before you use it. In other words, by prepaying, you avoid the price increases, and that is your return. Prepaying items is like investing at the item’s inflation rate.”
8. Budget, budget, budget! Leadership author and speaker John Maxwell once said: “A budget is people telling their money where to go instead of wondering where it went.” For a simple way to budget, Ramsey suggests using cash. If you know, for instance, you spend $600 per month on groceries, at the beginning of the month, take that amount out of your bank account and place it in an envelope marked “GROCERIES.” When you go to the store, you must use this allotted cash to pay for your food. The results will be twofold: 1. You’ll spend less because of that psychological cash dynamic we spoke about earlier and 2. You’ll have a simple way to allocate your food funds for the month. Once the money is gone, you’re done spending on groceries until the next month rolls around.
9. Prioritize your financial freedom to-do list, budget your finances and focus on accomplishing one “Baby Step” at a time. Ramsey says you must have a written budget and a written financial plan. Maybe this means adding 3% to your 401(k) or spending $100 less on entertainment each month or adding $50 extra on a house payment. Next, focus on accomplishing the budget and plan one “Baby Step” at a time. “The power of focus is that it works,” Ramsey explains. “Things happen. You check stuff off your list. Life gives you [a pat on the back] in the form of actual visible progress.”
10. Homes are the best investment. Time and time again throughout the book, Ramsey mentions the importance of investing in a home. It’s both a goal you should strive for and a way to invest your money that’s forward-thinking and long-term. Warren Buffett once told CNBC’s Becky Quick on the Squawk Box, “If I had a way of buying a couple hundred thousand single-family homes, I would load up on them.”

So, what’s the message? It’s something I learned from a mentor of mine, Jim Rohn, and it’s one of my favorite sayings: “When your outgo exceeds your income, your upkeep becomes your downfall.”