The richest life

Rob Carrick writes about the growing appeal of preferred shares in the Globe and Mail

(Continued from Day 14)

The aftermath has been painful. As a financial author and commentator, I hear almost daily from frustrated, disheartened Canadians. We want to be responsible, to live comfortably within our means, and to prepare for our retirements, but we are discouraged about our ability to do so.

This guide was designed to as an antidote for that discouragement, providing a series of easy-to-apply strategies to help you avoid risk (also known as losing your hard-earned money) and create wealth, without losing sleep in the process. And although it is really tempting to use big words and throw in every piece of information that has ever been written about the financial markets, we’ve made a real effort to keep it simple and relevant to the needs of individual Canadian investors. If it isn’t here, it’s because you can build wealth and generate income without it. If you want to learn more, either because you’re actually interested or because you want to impress other guests at cocktail parties, you’ll find a list of further recommended reading in the appendices.

We begin with strategies for building wealth, and then move on to strategies for creating income with that wealth. Through the liberal use of quotes throughout the book, we’ve let the experts speak for themselves. The tone throughout is conversational, because we believe that if you wanted a textbook, you’d read a textbook – and wherever we use a word that a beginning investor may not be familiar with, we’ve tried to provide a definition.

“When facing a difficult task, act as though it is impossible to fail. If you’re going after Moby Dick, take along the tartar sauce.” H. Jackson Brown, Jr. Life’s Little Instruction Book

It is impossible to believe that Canadians – known for our prudence as well as our politeness – would choose to gamble away the savings we work so hard to accumulate, money that we will need to live on in what may be the longest retirements in history.

Yet from 1996 to the early months of 2000, that is exactly what many of us did. It is exactly what too many of us, dazzled by charts and sales pitches, continue to do. It’s time to stop the madness, and we are here to help.

Benjamin Graham felt so strongly about the difference between true investment and speculation that he begins his investment classic, The Intelligent Investor, with a two-page explanation on the distinction. In short, he says that a speculator is anyone who buys stock ‘on margin’ (with borrowed money), who buys a ‘hot stock’, who buys without a full understanding of the risks, or who buys “without proper knowledge or skill.”

In case you’re not familiar with Benjamin Graham, you should know that his most attentive student, Warren Buffett, has applied those early lessons to become the second wealthiest man in the world. Warren Buffett is also the only “investment guru” I know of who actually became wealthy by investing rather than by turning other people’s wealth into their own through fees and commission.

Graham’s definition reveals the tragic truth of the late 90’s – we thought we were investing, but we were speculating, gambling money we couldn’t afford to lose. Worried about retirement, tired of sitting on the sidelines while our friends and co-workers boasted of high returns, we cashed in our Canada Savings Bonds and GICs, even borrowed money, and moved into mutual funds, touted as the ‘safe’ way to invest in the market. With the full support of advisers who only got paid when we bought a mutual fund or stock, we bought companies we knew very little about at exorbitant prices, believing that the astronomical rise in their share prices was evidence enough of their success.

Why optimism, vision and hope were never more important than they are today … Caroline Kennedy writes eloquently about why she’s endorsing Barack Obama in the Democratic primary.

Once we create order in our financial lives, our anxiety will diminish a great deal, but it won’t disappear entirely — not unless we retreat to Walden’s Pond. The more we expose ourselves to environmental stresses, the more time we need to invest in treating our anxiety. Modern living requires us to counteract the stresses of modern life through active self-care — and accepting that fact allows us both to treat the anxiety that we are currently experiencing and to shore up our strength against future challenges.

Just as importantly, we must come to understand that anxiety does not indicate that there is a terrible problem lurking somewhere.

I have spent a great deal of time over the last five years listening to the “still, small voice” of my higher self, and one thing that has become crystal clear is that it never speaks from a place of fear. As Reverend Marvin Anderson used to say, the voice of God is always a Yes! Your divine self is a point of awareness in the ultimate, infinite positive. If you are hearing a voice that says, “If you do that you’ll fail spectacularly and have to declare bankruptcy and even your mother will think you’re a fool” that is not your highest self speaking. That is the voice of anxiety. The only truth it signals is that it is time to treat your anxiety through self-care.

So, let go of that particular myth. Your anxiety is not trying to warn you that you’re about to move in the wrong direction. It is warning you not to move at all, not to grow, not to reach toward your potential. It is warning you to ’stay safe’ by resisting change. (Since change is the one constant, resisting change is ultimately always a waste of precious energy and time.)

Never attempt to treat anxiety by attempting to solve the problems that anxiety attaches itself to. I find that it’s very helpful to treat anxious thoughts like upset toddlers. Reasoning with anxiety is a waste of time — distraction is the only real solution. Do whatever it is that best distracts you (unless that activity is also anxiety-provoking). Go for a long walk, see a funny movie, meditate, make yourself a nice cup of tea and re-read a favourite book. Get a baby sitter if you have young children, and take a hot bath or a nap. Stop everything — and treat the anxiety.

Why is this important? First, because acting from a place of anxiety is the least effective way to overcome any real challenges we face. Any decision made from a place of fear is very likely to be a bad decision.

Let’s recap. First, we rid ourselves of our anxiety magnets by creating order in our financial life — then, we treat any environmental anxiety on a regular basis.

And if that doesn’t work, if we are still uncomfortable, it is safe to conclude that we are suffering from divine discontent. That means that we must change our lives. For the primary difference between divine discontent and anxiety is that divine discontent spurs us to action — while anxiety keeps us in inaction.

Self-actualization, living our best life, determining our purpose and reaching our divine potential requires that we take risks. So, first we treat our environmental anxiety. Then we embrace our divine discontent, and harness it — we use it to lift us off the couch, to create a defense against those in our lives who are afraid of losing us if we become our best selves.

Frank X. Barron was a scholar who spent his life exploring the creative mind. And just to be clear about what we are talking about here, know that everyone who ever succeeded at anything, from art to business to motherhood, did so because they engaged their creative mind. Sometimes the only art we engage in is the creation of our own lives, and it might be argued that the creation of our lives is the greatest masterpiece of all.

Dr. Barron wrote that “Creativity requires taking what Einstein called “a leap into the unknown”. This can mean putting your beliefs, reputation and resources on he line as you suffer the slings and arrows of ridicule.”

During more than 20 years in the world of finance, I have identified a number of traits that separate those that succeed from those who only dream of succeeding. Successful people don’t wait until they feel safe before they take action. They don’t let their fear paralyze them — instead, they harness that fear to motivate them to do their best.

Moving From Survival to Purpose

Financial Serenity is that point at which money becomes a source of energy rather than an obstacle to our best life, but it is also a daily, living practice. In freeing ourselves, we are able to move from the business of survival to the business of fulfilling our purpose, and if you’ve been watching the news lately, then you know that the world is in dire need of our help.

It’s time. This isn’t just about living our dreams — it’s about what the Lord’s Prayer refers to as “God’s will be done — on earth as it is in heaven.” Imagine a planet full of people living their purpose, living the reality of abundance and prosperity: living the reality of joy. And the only way to get from here to there is one person at a time — it begins with us. Here. Now.

Dr. Abraham Maslow described the process of self-actualization this way:

“a person’s need to be and do that which the person was “born to do.” “A musician must make music, an artist must paint, and a poet must write.” These needs make themselves felt in signs of restlessness. The person feels on edge, tense, lacking something, in short, restless. If a person is hungry, unsafe, not loved or accepted, or lacking self-esteem, it is very easy to know what the person is restless about. It is not always clear what a person wants when there is a need for self-actualization.

Maslow is describing here the condition that I refer to in Financial Serenity as “divine discontent.”

Unfortunately, our most common tendency is to try to cure divine discontent, which often feels like garden-variety anxiety, by trying to create more security in our lives. Staying in the jobs we hate, avoiding risk — the opposite of those actions that will allow us to self-actualize and ease the divine discontent.

But let’s talk first about garden-variety anxiety — the social miasma of fear that’s created by the noise of the world, by traffic, by the media, for whom, if it bleeds, it leads, and in which a story is only a “REAL” story if it’s truly bad news. The anxiety that’s caused by urban living and which simply floats about, waiting to attach itself to whatever our favourite subject of worry is. That ‘favourite form of suffering’ might be concern for our health or our children — but it’s often wholly or partly about our money.

Environmental anxiety is a fact of life in an urban environment. We can control the volume — by limiting our exposure to media, noise, traffic and bustle, and by increasing our exposure to the natural world, to healthy, nutritious food and exercise, and inspirational people and activities — but we can never entirely turn it off. The greater the population, the greater the environmental stresses. The greater the environment stresses, the greater the level of anxiety.

In order to transform anxiety into creative energy, we have to first understand that anxiety is not personal, and it will not disappear when we have solved the problems we think make us anxious. Anxiety IS. It is free-floating and attaches itself to the weakest link in our lives. For many of us, that link is money.

Most of suffer from anxiety at some time, particularly when it comes to issues of money and security, and most of us begin by believing that if we do things right, we will become financially secure and therefore, we will no longer feel any anxiety about money.

That’s a myth. Money does not cure anxiety.

I’ve spoken previously about the very surreal experience of living from paycheque to paycheque as a struggling single mother while managing investments accounts in the millions of dollars — only to find that the investors who were blessed with these riches were even more afraid than I, living lives that were made smaller by fear of losing what they had, or that it might not be enough.

Most of us know someone that fits that description — someone that has more money than we could ever imagine having, and yet whose life is small — constrained by fear, or by greed. People who work too hard, long after they’ve achieved financial success, until their health and relationships are ruined, or who can’t enjoy the money they have because they are impoverished by fear.

Conversely, many of us have had the experience of working hard, increasing our income, increasing our savings and our investment portfolio, only to find that our expenses go up even faster, we pay more in tax, and we can’t get ahead.

If money is not the solution to anxiety — what is the solution?

We must be able to separate anxiety from divine discontent, and the way we do that is simply by treating the anxiety. If our ‘treatment’ relieves the anxiety, it is not divine discontent, which can only be cured by growing into our divine potential.

Therefore, when we feel anxiety, the primary step is to treat it.

To do so, we must begin by creating order. If you don’t know where your money goes every month, or if you really have no idea how much you make (net of taxes and work-related expenses) then you have created an anxiety magnet.

To rid yourself of that magnet, you need only create order in your finances — recording your expenses, creating and maintaining a spending plan, and moving toward that state of grace in which you spend all of the money you earn on things that you truly care about, things that add to the quality of your life.

If you have no idea how to go about doing that, click here. I also highly recommend “Your Money or Your Life,” the best-selling book by Joe Dominguez and Vicki Robins.

This threefold process will allow you to transcend any negative beliefs that are undermining your relationship with money.

1. Practice faith. Read inspirational books; visit www.beliefnet.com and do some of their wonderful ten-minute meditations; surround yourself with positive, creative people. James told us that “faith without works is dead:” it is also true that faith as a practice, rather than as a concept or ideal, will provide you with the confidence and courage to make creative changes in your life.

2. Apply the power of symbolism — it is the language that speaks directly to the unconscious mind. Rid your environment of anything that makes you feel impoverished, and surround yourself instead with symbols of luxury and prosperity, items and experiences that make you feel prosperous even if they may have no meaning for other people.

For example, get rid of tattered clothes and furnishings that you hate, even if it means wearing your one good outfit every day and living in nearly bare rooms. Not only will you rid your environment of poverty symbols, you create a space, an invitation, for new and beautiful things. Don’t rush out with your Visa to replace the things you let go of. Instead, allow life to offer its gifts — and allow yourself to experience the natural, inevitable flow of abundance. Your job is to create space and then to accept with gratitude and delight.

3. Learn to live the art of gratitude. Without gratitude, wealth is wasted on us, and wealth goes only where it can be creative. Keep a daily gratitude journal, do gratitude meditations in which you affirm each and every thing you have to be grateful for today, get outside to experience the extraordinary abundance of nature, practice seeing the perfection in small moments and pleasures, and live gratitude by living “with an open hand,” acknowledging the many blessings in your life by sharing them with others.

“Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend. Gratitude makes sense of our past, brings peace for today, and creates a vision for tomorrow.”
Melody Beatty

The following is the first of a series of summaries of workshops I facilitated at Unity of Vancouver in 2002. This is the Coles Notes version, obviously, but if you’re looking for financial serenity in your life, you may find this offers easy access to the path.

Lesson 1: Prosperity begins with letting go of personal money myths to embrace a more powerful truth

Living the reality of abundance requires acknowledging the reality of abundance — and that acknowledgment requires the rejection of many almost universally accepted ‘truths’.

“There is not enough to go around.”

“Life is a struggle.”

“We must work hard (suffer) in order to get ahead.”

“If we don’t fight for and cling to what’s ours, we’ll lose it.”

While all of these statements are true when viewed from a superficial perspective, financial freedom requires that we embrace the concept of parallel truth. While poverty may be real, abundant wealth is just as real, and is available to us through the simple means of a shift in perception. The quality of our life is determined by our behaviour, and our behaviour is rooted in our beliefs.

“The opposite of a correct statement is a false statement. The opposite of a profound truth may well be another profound truth. ”
Niels Bohr (1885-1962)

To accomplish this shift in perception, and thus, a shift in “life-style,” we need only adopt a three-fold process — join me tomorrow, or if you’re an eager beaver, visit the “Achieving Financial Serenity” page.

Money is perhaps the greatest source of conflict in marriage, but it doesn’t have to be that way. As I love to share in my workshops, creating a shared vision can be one of the most profound intimacies a couple ever experiences. And creating and executing a plan to manifest that vision is an extraordinary partnership-building process.

In today’s New York Times, financial writer MP Dunleavy writes about experiencing that process with her husband.  

Many people ask me what they should read in order to increase their financial IQ. It’s an excellent question, and there are some great and many not-so-great books out there.

But I think it can be simpler. Rob Carrick’s personal finance column in the Globe and Mail is usually objective, information, accessible and in tune with what we’re thinking about.

Moneysense magazine (noted in an earlier post for its Couch Potato Portfolio) section is by the the best source of personal finance and investment information for Canadians — if you don’t want to commit to a subscription, you can often find a copy in your local library.

In terms of investment websites, there is nothing better for investors than Shakespeare’s Investment Primer.

The publisher Keith Betty describes the site as a primer for do-it-yourself investors, but I’d argue that this is the kind of basic knowledge that investors should also have at their disposal when considering recommendations from a financial adviser.