Friday, March 30, 2012

Mega Lottery and Millions!

I have managed money professionally for over 30 years. I have a substantial net worth and consider myself a serious student of prudent money management and investment behavior. I am in the markets every day, long or short.

Since the inception of my firm in 1995, we have managed money for lottery winners and some very highly compensated Native American tribes and individuals, some individuals making over $100,000 per month. It is true, nearly all lottery winners are broke after 5 years. Broke. They are in the same financial position they were in prior to winning, usually with larger financial responsibilities they have no way of paying. Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty. Yes, that’s a bit harsh, and yes, people have the right to make their own decisions. Even bad ones… Also, many people tend to significantly overestimate the odds of winning because we tend to assess the likelihood of an event occurring based on how frequently we hear about it happening. The lottery is nothing but society's perfectly efficient way of, to use a term from the vernacular, keeping the poor man down.

It has been enjoyable to listen to this Mega Millions lottery talk. Althought it would be very difficult to lose the entire amount by making poor choices, it would not be impossible.

You see, savings and retirement are not institutions. They are matters of personal responsibility. They are an attitude - not some external organization or person to blame. Generally speaking, don't blame anyone but yourself for your financial problems. You're just labeling yourself a victim. Most of the "rich" deserve to be rich because they earned it. Aspire to be rich, don't denigrate them. That is just a class envy attitude. Besides, it is the rich who create wealth. Has anyone ever heard of a poor person giving anyone a job? Is it the poor who give to the Salvation Army and the Red Cross? Do the poor support the churches? The so called rich, small business people, etc., are the ones who put people to work.

Try to act like the rich - be frugal, save, delay material gratification, save, take personal responsibility for yourself, save, delay buying iPads, iPods, Blackberries, big screen TV's, video games, extraneous cell phone charges, and did I mention, save.

The key word in retirement planning is not retirement. It is planning as in, plan to save to have your house paid for, plan to save to have your car paid off, pay off the credit cards. Have enough saved to generate a steady income to add to the biggest ponzi scheme in existence, Social Security. Start now. Do not wait.

In my experience, here are some "poor" spending habits to drop, the sooner the better.

1.Smoking
2.Drinking
3.Gambling
4.Driving a gas hog
5.High end cell phone
6.High end cell phone plan
7.Extended cable
8.Premium channels
9.Changing oil at 3000 miles(7.5 to 10k is fine)
10.Washing clothes in hot water. Cold is better anyway
11.Going out to eat
12.Going out to movies
13.Going out to clubs
14.Speeding
15.Buying the latest gadgets
16.Pets,plants and anything that cost to keep up,feed ,etc.
17.Gym membership
18.Country club membership
19.Coffee of the month club.
These are things that worked for me (they are not for everyone)so I had more money to take trips, hunting trips,etc.

I know some will come back with stupid remarks like “quit breathing”, ”quit living”, etc. That's fine. For those there is little hope until it gets late in life.

Learn to really enjoy life. Go for a hike. Take in the arts. There is alot of "free" in life, just go find it.

Sure, you can listen to CNBC and Obama drone on about the recovery, about the wealth effect, about trickle-down economics, about why adding $150 billion in debt per month is perfectly acceptable, and about a brighter future for America and the world. If you win the lottery I hope you will diversify your winnings across currencies as well as into physical metals. I hope you would interview me to be one of your money managers.

I bought a ticket yesterday.  I hope we both win!

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