Financial Eclipses

So, where I am located in this great country, there was only a partial solar eclipse today.  Eclipses are a natural part of our lives, a solar eclipse where the moon blocks the sun, or a lunar eclipse where the earth blocks the sun’s light hitting the moon.  At any rate, its one large body blocking out the other.  The majesty of it generates a good feeling, as you could hear from all the oohs and aahs from the total eclipse viewers across the country today, and the sounds of incredulity lasted from seconds to a few minutes, but when we see our expenses totally eclipse our income, or our liabilities totally eclipse our assets, it is not such an oohy aahy moment.

Yes, I can hear the groans, indicating that that’s a real stretch, but is it really?  because that is exactly what happens when we spend more than we make.  Our expenses totally eclipse our income, and while solar and lunar eclipses in totality last only a few minutes before they revert to partial coverage, for many of us when our expenses eclipse our income it is either the start of a bad trip or just another stop on the bad trip journey, that often we have difficulty recovering from.  So, our wealth building goal really has no room for total expense or total liability eclipses. 

There are really only a few components of wealth building.  Earning, Cost containment and Growth of Funds.  You will not be able to look directly at serious wealth building without glasses made up of these three components.  Do you have your watch glasses ready?  So, let’s take a look at the components:

Earning: This is really the main pillar of wealth building. We need to have a means to generate income on a regular basis, to cover our monthly operational expenses, plus funds to afford some current enjoyment and to include funds that will be our set-asides or harvest for funding the portion of our non-earning lifetime.

Cost Containment: This component is critical in order to actually have those available funds for enjoyment and to plant investment seeds.  These seeds will provide for the latter part of our lifetime when we are less able to generate steady income.  If we act on the idea that we can spend all we make or worse even more that we make we are actually ensuring that our road to wealth building will be a tortuous uphill one.  We can avoid that rough road by setting this simple rule in motion.  Spend much less than you make, and if you can’t do that, find ways to make more income until you can.  

Growth of Funds: This component is the conscious harvesting of earned income that we intentionally save and then invest to aid the growth of our earned income.  Most everyone has heard the financial suggestion - Pay yourself first. We must do that.

Earning alone is unlikely to get you to the wealth building space that you want to inhabit.  Actively making investments with portions of your earned income, even a small amount initially will get you on that wealth building road and also to the point where you are actually able to far eclipse your expenses by your income and your liabilities by your assets.   It’s a great feeling to be on that asset or income eclipse ride.

A total solar eclipse from the specific location you are in today, may happen only once or twice in your lifetime, but for our financial well-being we must take action every day to make sure that rather than having an expense eclipse or a liability eclipse, which can happen way more frequently, we have an enduring income or an asset eclipse.

So, when we don our 3 component wealth building eclipse glasses, we can settle in and over time enjoy the financial afterglow of a long-lasting eclipse not just one for a few seconds or minutes.

If you are not already doing so, make a commitment to start getting those components together.  Wealth building will not happen without them. Make them a habit.  Do not however give up because you feel overwhelmed that maybe they are beyond your current ability.  Just start. 

Work on

a) increasing your earnings, either by a better paying job, or by getting additional streams of income, or

b) reducing each of your monthly expenditures by even 1%, and for some expenses you may find that you can completely eliminate them, or find lower cost alternatives.  Many of you are great at finding those cost saving solutions for your company, focus those same skills on your own personal economy, or

c) deciding to make regular savings on a monthly basis (pay yourself first) and when you have the minimum required for a particular investment, start investing.  If you are currently investing, when your income increases, increase the percentage of your income that you invest, even by 1%. 

Of course, you can do all three to get there faster.  In a future post, I will talk about why you needed to start yesterday, but since yesterday is already gone, the next best day to start is today.  In 2024, we will have another opportunity to have total solar eclipses in the US, use that as a measure of where you will be in accomplishing your own income or asset eclipse, and as a spur to get you there – its 7 years from now. 

We are all on our own wealth building journey, some of us are on our way and some of us are still preparing to get on the road.  The nation and I would love to hear from you any tips you have as you move on down that road, or if you have stumbled on any obstacles in simply just trying to get on the road, or staying on the road, let us know that too and we will share any solutions or tips that we have found to be effective.  I would love to hear your comments.

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"No matter who you are, making informed decisions about what you do with your money, will help build a more stable financial future for you and your family." Alan Greenspan