Discipline

The Holidays are here and I wish everyone and their families a happy and safe holiday season!

In my last blog entry the word discipline was mentioned several times. This was not by accident. The word Discipline is defined by Merriam Webster several ways but the most common way is : Self Control.

I have found that when most people ask for financial advice they essentially want to learn how to make more money in the market. This is the wrong approach especially as most of us do not know how to save a dime and worst of all control ourselves when we are in the Mall. "Discipline" or "Self Control" is the foundation for financial success.

Understanding the difference between "Wants" and "Needs" is the first step. Although most people inherently know the difference, most do not exercise the practice. How many times have we all seen someone on Oprah or the Suze Orman Show crying because they are $30K in the hole over credit card expenses related to impulsive shoping and they can no long make their rent or mortgage payments. This is all too common especially among those between the ages of 18-35.

Now, I could sit here and be the plain vanilla person offering financial advice and list what are considered "Wants" and "Needs", but I won't because you already know what they are. What we are lacking is the Discipline to practice what we know is right.

Let's be responsible for ourselves and stop all the excuses of "They keep offering a higher limit on my credit card". "It was on sale". Or here is my favorite one, "I didn't know the interest rate was going to be so high". Stop pointing the finger and realize the problem is you! The retailers are supposed to entice you. It's your responsibility to say "No" if you are not in the position to make a purchase. The retailers are like "Drug Dealers" and the "Consumers" are the junkies. The Retailers will give you credit, layaway, or any form of payment to keep you buying. I bet if you think back to the last several times you purchased something from a department store they asked you "Would you like to open a credit card with us? You'll save 10% on your purchase." Sound familier? The dealer talking to a potential new client. People, just say No!!!!!!!

So, now that I have vented I will offer some simple advice. With the holidays here we all are going to be in the mall. There is nothing wrong with being there and I am not going to tell you to not go. What I am going to suggest is to go with a purpose. Have a list of what you need to get and have an idea of what you are willing to pay for it. Most importantly, do not deviate from your plan. When you see something you "Want" that is considered impulsive, the first thing you should do is walk away. This will allow you time to think about what the purchase will mean to you from an emotional and a financial stand point. My wife and I always do this. If we are not together we will call one another and bounce the idea of the the purchase off of the other person. Usually within a 1 minute conversation the initial excitement of the item has diminished and we have saved ourselves from a impulsive purchase.

While shopping don't fall into the salespersons/dealer's trap. They will tell you anything. You may hear "It may not be here later", "There is only left in your size" or "the sale won't last forever". Bullshit!!!!!!! Most retail items are not only sold in one specific store or even chain. The item will always be somewhere else. It may not be on sale next week, but who cares! If you don't "Need" the item than you lost nothing.

Having self control is a sign of strategic planning and keeping an ultimate goal in mind. Succumbing to "wants" will get you in trouble.

For those of you who have fallen into the traps listed above, it is not too late. Like any addiction, quitting cold turkey is not the best approach. Begin to slowly implement some of the suggestions mentioned above. Trying to cut yourself off all together will only cause regressions and you may end up worse further down the road. Take baby steps! Slow and steady will win the race. The goal is to build a "house" with a solid foundation not a "house of cards".

News updates:

This past week was marked with the Big 3 asking for government assistance, Citi Bank announcing they will lay off 53,000 people, JP Morgan laying off 3,000 Investment Bankers and the Dow dropping dramatically to levels not seen since the early 2000's. The only bright spots were President elect Obama announcing Tim Geithner as his pick for Treasury Secretary and gas prices have nationally dropped below 2.00 a gallon. The Treasury Secretary announcement saw the market rebound although we are still at very low levels especially compared to a high of over 14,000 + on the Dow a little over a year ago.

Many have labeled me and my close friends as pessimists because we have been preaching "Doom and Gloom" for the past year with respect to the national and global economy. Well people, if you didn't think we could have another Depression you are wrong. In fact there are some scary comparisons to the Great Depression happening right now. One of these comparisons is the two week period ending November 20, 2008 with the Dow dropping 16%. The same two week period in 1931 saw the Dow drop the same amount. If you think that is scary, the final five weeks in 1931 the Dow dropped another 20%. We all feel that at some point we need to reach a bottom but the market has no obligation to stop falling because is has already fallen so much.

With no positive economic data foreseeable I would hold on to your britches and expect more fall out. Don't be disillusioned with the fact that some stocks are so cheap that they can't fall anymore. Understand that you still can lose money. This is only the beginning. We have a long way to go. Act like each pay check may be the last.

Stack your Chips-

King of Cash

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