The Hindu Business Line : Are your closets more organised than your finances?

Thus writes Robert C. Gay, partner of Bain Capital ("one of the world's leading private investment firms, with over $25 billion in assets under management") in his foreword to "The 5 Lessons a Millionaire Taught Me," by Richard Paul Evans, from Simon & Schuster (www.simonsays.com).

"Money is a two-edged sword, and has an equal capacity for creating happiness or misery," adds Gay.

"Never before have so many had so much stuff and so little freedom. Debt is forcing us to work more and more, stealing from us our precious time as well as our happiness," rues Evans in the preface.

"Money problems are breaking our marriages, our homes, and our health, and a prime motivating factor for crime and domestic abuse."

It is not luck or superior intelligence that makes the millionaire, says the author. "The wealthy understand the principles of accumulating wealth and live them."

Begin, therefore, with the first of the five lessons: `Decide to be wealthy'. Because, "fiscal health is very much like being in great physical health."

Do you know that the most obsessed with money are not the millionaires, but the ones living paycheque to paycheque? Sadly, therefore, "To the financially enslaved, life becomes all about money," though, in truth, it isn't so. "Money is a powerful ally," says Evans. As G.B. Shaw said, "Lack of money is the root of all evil."

However, `extravagant' is not equal to `wealthy', explains an equation. Evans cites Thomas J. Stanley's `The Millionaire Next Door' and William D. Danko's `The Millionaire Mind' - that today's millionaires are remarkably frugal and careful with their money.

"In many cases, even their own children do not know of their wealth." Lesson two is, `Take responsibility for your money.' This means, "Knowing how much you have, where it is coming from, where it is going, and what it's doing in the meantime." Evans rues that most people's closets are more organised than their finances.

"No matter how irresponsible you've been in the past, or still are, it's never too late to take control," urges the author. Don't say you have no time to follow your money. For, that's like saying, "You don't have time to watch the traffic signals as you drive." An old saying counsels, "There are none so blind as those who will not see."

Third lesson, `Keep a portion of everything you earn,' rather than `give your money to everyone but yourself'. Evans reminds, "It's not what you earn; it's what you keep that makes you rich."

But how much to keep? "A minimum of 10 per cent of your ongoing salary, and 90 to 100 per cent of your side earnings."

If you thought that it might pinch to put away a tenth of the income, you'd be surprised to know that most people find 10 to 20 per cent of their income `disappear without a trace'! "They can easily save and invest that much of their income and not notice any change in their current lifestyle."

It is important, though, that you seek professional assistance. "Avoid risky schemes and investments, no matter the supposed payoff."

Never kill the goose that lays the golden eggs by spending off the nest egg! Use 10 per cent of your funds for debt repayment, advises the author.

Lesson four, `Win in the margins'. Means? "The wealthy find additional ways to increase contributions to their growing nest egg." How? Here's a clue from J. Paul Getty: "The millionaire mentality watches costs and tries to reduce them - and strives to increase production and sales and thus profits."

Consider, therefore, each expenditure carefully, advises Evans; because, spending isn't to be equated with happiness, and "freedom and power are better than momentary pleasure."

When negotiating, use the `seven golden words' - `Is that the best you can do?' Also, before buying ask yourself if it is an impulse purchase or a planned one.

"Whether it's for groceries or a new car, save time and money by shopping with a list." An indispensable survival tip: "If the salesperson said he needed an answer `right now'," quickly say, `No'.

The last lesson is, `Give back.' Success in life cannot be measured on a balance sheet, points out Evans. "The truest measure of achievement is the degree to which we've learned to love. And service, through sharing our wealth and our time, is love made visible." There are karmic principles at play, believes the author. "We get back when we give."

Share also `the lessons of proper money management,' exhorts Evans. "Teaching the Five Lessons to others will help you internalise them and become better prepared to live and enjoy the fruits of them yourself."

Worthy read.

BookValue@TheHindu.co.in