By Lewis Braham

Gabelli on His Botched Google Bid and the Beauty of Compound Interest

By Lewis Braham  Dec 8, 2014 4:29 AM PT  

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Photographer: Scott Eells/Bloomberg

Mario Gabelli is very clear on what's luck and what's skill. Winning a poker championship after just learning how to play Texas Hold 'Em? Pure luck, says the founder, chairman and chief executive officer of GAMCO Investors Inc., an investment firm managing $47 billion. Making money for clients he and his firm have "dedicated their lives to"? That's the other thing.

The way the Bronx-born Gabelli, 72, won the poker game is telling, though. After reading a couple books, learning the mechanics from guys in the office and practicing online, he sat down with players including Janus Fund's Bill Gross and pros Johnny Chan and Jennifer Harma and realized his strategy would be simple. Calculating that the people around him were Type-A and would all try to kill each other, he'd just sit back and let them crash.

In his business, too, Gabelli's a shrewd calculator of the odds. Since founding what was originally Gabelli & Co. in 1976, he's excelled at ferreting out cheap stocks that often went on to become far more valuable when a merger or other kind of corporate restructuring came along.

The investor's oldest charge, the Gabelli Asset Fund (GABAX), has delivered a 12.4 percent annualized return since its 1986 inception; that compares with 10.4 percent for the S&P 500. In the last 15 years the fund has beaten 91 percent of its peers in Morningstar’s large-cap blend category.

Bloomberg.com spoke with Gabelli, now a resident of Greenwich, Connecticut, about what he’s learned from his decades of experience.

In your experience what is the biggest mistake investors are prone to make?

Chasing fads. In the 1960s, it was bowling alleys. In the 1970s, the Nifty Fifty. The 1980s, leveraged buyouts. In 1999, people would buy only technology, media and telecom — the TMT stocks. Today it’s a combination of new social media and biotech stocks.

Notwithstanding that, if you hold certain cash-generating companies and you buy at a reasonable price, you're going to make more than you will in Treasury bills. The mistake is not staying focused on that. If I’m an individual investor and I have $100,000 I want to invest in the next five to 10 years, I'd have no problem doing what Warren Buffett recommends — buy an S&P 500 index fund. You're going to earn 5 percent to 7 percent over the next 10 years. The 10-year government bond is yielding only 2.3 percent, so you could earn five percentage points higher.

Aside from not chasing fads, how can people become better long-term investors?

We as a country should teach individuals about finance. Show everyone the notion of compound interest. If I put $1,000 a year away at age 20 and I earn 4 percent, 6 percent, 8 percent, what will I have at age 65? Show them the virtue of putting twenty bucks a week away instead of getting that extra latte at Starbucks or a pack of cigarettes. A pack of cigarettes is 11 bucks in New York City. Cut out one pack of cigarettes and one latte, that is $20 a week, that’s $1,000 a year. What will that become in 45 years and will you really miss the latte and the cigarettes? Teach fundamentals like that.

So it’s not just chasing investment performance but being a saver?

If you put money in the bank or in Treasuries you are going to earn 2.3 percent and you're not maintaining purchasing power. What happens if there’s inflation? If you put money in a box and prices go up faster than your income, you’ve got a problem. Because that subway in New York City used to be a nickel and now a MetroCard for a ride is two and half bucks. You have to protect yourself and the best way to do that is to have a basket of stocks.

Getting back to fads, is there any investment trend you missed and think, “Why didn’t I do that one?”

When Google went public, I bid a dollar below the auction price, and I only changed my bid a little bit afterwards. You always have those mistakes. You never see them in the results. I think we’ve done an outstanding job. Could we have done better? Absolutely. Like Ted Williams, he batted 400 and he made out three out of five times. We are making mistakes all the time. Every day.

Where do you think the most interesting opportunities are today?

We always act like the consulting firm McKinsey and try to find not where [the opportunities are] tomorrow but over the next 10 years. One trend is the aging of the population and the aging of infrastructure. When we talk infrastructure not only are we talking the obvious ones like bridges, but avionics -- planes and airports -- or railcars that don’t meet today’s safety standards. In the next 20 years you will see more aircraft to replace our aging fleet and more aircraft to expand the fleet. According to Boeing, over the next 20 years 35,930 new aircraft will be needed.

What aviation companies do you like?

We like Kaman [KAMN], a tiny company based in Connecticut. We own a large piece of it, like 25 or 30 million shares, and it sells at about $40. They have a tapered roller bearing that goes on these planes that is self-lubricating. It provides a longer lasting product that doesn’t have to be repaired.

You've also got the companies that are bigger than that, like Precision Castparts [PCP], that make a lot of the forging and castings that go onto airplane equipment. We’ve owned it for 10 years. Then we obviously have engine companies -- Rolls Royce [RR:LN], United Technologies [UTX].

On a personal note, from what I read, your hobbies are --

My hobbies are very simple. I read annual reports. By the way, I read them in hard copy. I cannot read them online. I like to mark them up as I am turning pages.

Lewis Braham is a freelance writer based in Pittsburgh

Confessions of a Landlord: I Never Raise the Rent by Holly

Confessions of a Landlord: I Never Raise the Rent

October 21, 2014 By Holly Leave a Comment

As most of you know, Greg and I are the owners of two single family rental properties in Central Indiana.  We have owned them since 2006, which means that we’ve been doing the whole landlord thing for quite a while.  And although we have experienced our fair share of challenges, being a landlord has been fairly uneventful overall.  Obviously, I would really like it to stay that way. 
A few years ago, we were able to refinance our properties into two separate mortgages with lower interest rates.  Because of that move, our properties should be paid off in a little less than 12 years.  We’ll be 46-years-old then, and  rolling in cash since our rental income will no longer go straight toward the mortgages on our properties.  Our plan is to use most of those funds to pay for our children’s college education, then add it to our early retirement money pile.  I cannot wait.

Landlord Confession: I Never Raise the Rent

Fortunately, the amount of rental income we earn should increase over the years.  According to several media outlets, rents have been climbing all over the United States, including some areas in the Midwest where I live.
But I haven’t taken advantage of rising rents yet, nor do I plan to in the near future.  Why?  Because I have no plans to raise the rent on current tenants.  Here’s why:

• I have good tenants- Finding good tenants for your property is not always easy, and excellent renters are the unicorns of the residential real estate world.  I currently have decent renters in both of my properties and I want them to stay.  Forever.
• I have limited free time- Vacancies are the most time consuming part of being a landlord.  After all, when someone moves out, you typically need to clean and repaint everything then spend time finding a new tenant.  With two small children, I would rather spend my time doing something else.
• Rent increases are unlikely to pay off anyway- Let’s say I raised the rent $50 for one of my properties and my current tenants moved out.  I would then be forced to pay the mortgage myself for one month and spend a considerable amount of my free time cleaning the home and preparing it for the market.  The extra $600 I would earn during the following 12 months is less than the mortgage on either property, and would be cancelled out by the one-month vacancy.

Will I Ever Raise the Rent?

Those are the main reasons I choose not to raise rents on current tenants, but I am not against raising rents as time goes on.  My crazy brain actually thinks that raising the rent on new tenants is a much better deal than inching expenses up on people that already rent from us.  That’s because, by raising rents in-between tenants, I can capitalize on the new income source without losing a valuable renter or causing any additional work on my end.
I’m also not against raising rents more often once we reach early retirement.  Right now, we just don’t have the time to clean, paint, and seek out new renters every year, and would much rather let the current renters stay and get a good deal.  We’re definitely giving up some cash for the privilege, but we currently feel that the trade-off is worth it.
As with most things, it’s not all about money.  Time costs money too.  And right now, I would rather spend my time taking care of my family and growing my business.
Landlords, how often do you raise rent?  Renters, have you ever gone five years without a rent increase?

Filed Under: Budgeting and Income, Frugality and Saving Money, Real Estate

About Holly
Holly Johnson is a wife, mother of two, and frugal lifestyle enthusiast. She is the co-founder of Club Thrifty and a staff writer at Get Rich Slowly, Frugal Travel Guy, and U.S. News and World Report's "My Money Blog." Holly has been featured in the Wall Street Journal, Kiplinger Personal Finance, Fox Business, and Daily Finance.

Li Ka-Shing shares some of his money wisdom

Li Ka-Shing teaches you how to buy a car & house in 5 years

Feb 17, 2014By Guest

Hong Kong billionaire Li Ka-Shing shares some of his money wisdom, outlining an inspirational five-year plan to improve one’s lot in life

This article is translated from the original Chinese by Edmund Ng at CeoConnectz.

Suppose your monthly income is only RMB 2,000, you can live well. I can help you put money into five sets of funds. The first $600, second $400, third $300, fourth $200, fifth $500.

The first set of funds is used for living expenses. It’s a simple way of living and you can only be assigned to less than twenty dollars a day. A daily breakfast of vermicelli, an egg and a cup of milk. For lunch just have a simple set lunch, a snack and a fruit. For dinner go to your kitchen and cook your own meals that consist of two vegetables dishes and a glass of milk before bedtime. For one month the food cost is probably $500-$600. When you are young, the body will not have too many problems for a few years with this way of living.

Second set of funds: To make friends, expand your interpersonal circle. This will make you well off. Your phone bills can be budgeted at RMB 100. You can buy your friends 2 lunches a month, each at $150. Who should you buy lunch for? Always remember to buy lunch for people who are more knowledgeable than you, richer than you or people who have helped you in your career. Make sure you do that every month. After one year, your circle of friends should have generated tremendous value for you. Your reputation, influence, added value will be clearly recognized. You’ll also enhance your image of being good and generous.

Third set of funds: To learn. Monthly spend about RMB 50 to RMB 100 to buy books. Because you don’t have a lot of money, you should pay attention to learning. When you buy the books, read them carefully and learn the lessons and strategies that is being taught in the book. Each book, after reading them, put them into your own language to tell the stories. Sharing with others can improve your credibility and enhance the affinity. Also save up $200 per month to attend a training course. When you have higher income or additional savings, try to participate in more advanced training. When you participate in good training, not only do you learn good knowledge, you also get to meet like-minded friends who are not easy to come by.

Fourth set of funds: Use it for holidays overseas. Reward yourself by traveling at least once a year. Continue to grow from the experience of life. Stay in youth hostels to save cost. In a few years you would have travelled to many countries and have different experiences. Use that experience to recharge yourself so that you’ll continually have passion in your work.

Fifth set of funds: Invest. Save the $500 in your bank and grow it as your initial startup capital. The capital can then be used to do a small business. Small business is safe. Go to wholesalers and look for products to sell. Even if you lose money, you will not lose too much money. However, when you start earning money, it will boost your confidence and courage and have a whole new learning experience of running a small business. Earn more and you can then begin to buy long-term investment plans and get long-term security on your financial wealth being of yourself and your families. So that no matter what happens, there will be adequate funds and the quality of life will not decline.

Well, after struggling for a year and if your second year salary is still RMB 2,000, then that means you have not grown as a person. You should be really ashamed of yourself. Do yourself a favour and go to the supermarket and buy the hardest tofu. Take it and smash it on your head because you deserve that.

If your monthly income is at RMB 3,000, you must still work very hard. You must try to find a part time job. It will be great to find part time sales jobs. Doing sales is challenging, but it is the fastest way for you to acquire the art of selling and this is a very deep skill that you will be able to carry it for the rest of your career. All successful entrepreneurs are good sales people. They have the ability to sell their dream and visions. You’ll also meet many people that will be of value to you in the later part of your career. Once you’re in sales, you will also learn what sells and what not. Use the sensitivity of detecting market sentiments as a platform for running your business and in the identification of product winners in the future.

Try to buy minimal clothes and shoes. You can buy them all you want when you’re rich. Save your money and buy some gift for your loved ones and tell them your plans and your financial goals. Tell them why you are so thrifty. Tell them your efforts, direction and your dreams.

Businessmen everywhere need help. Offer yourself to do part time for any kind of opportunities. This will help to hone your will and improve your  skills. You will start to develop eloquence and soon, you’ll be closer to your financial goals. By the second year, your income should be increased to at least RMB 5,000. Minimum it should be RMB 3,000, otherwise you would not be able to keep up with inflation.

No matter how much you earn, always remember to divide it into five parts proportionately. Always make yourself useful. Increase your investment in networking. When you increase your social investment, expand your network of contacts, your income also grows proportionately. Increase your investment in learning, strengthen your self confidence, increase investment in holidays, expand your horizons and increase investment in the future, and that will ultimately increase your income.

Maintain this balance and gradually you will begin to have a lot of surplus. This is a virtuous circle of life plans. Your body will start to get better and better as you get more nutrition and care. Friends will be aplenty and you will start to make more valuable connections at the same time. You will then have the conditions to participate in very high-end training and eventually you’ll be exposed to bigger projects, bigger opportunities. Soon, you will be able to gradually realize your various dreams, the need to buy your own house, car, and to prepare an adequate education fund for your child’s future.

Life can be designed. Career can be planned. Happiness can be prepared. You should start planning now. When you are poor, spend less time at home and more time outside. When you are rich, stay at home more and less outside. This is the art of living. When you are poor, spend money on others. When you’re rich, spend money on yourself. Many people are doing the opposite.

When you are poor, be good to others. Don’t be calculative. When you are rich, you must learn to let others be good to you. You have to learn to be good to yourself better. When you are poor, you have to throw yourself out in the open and let people make good use of you. When you are rich, you have to conserve yourself well and don’t let people easily make use of you. These are the intricate ways of life that many people don’t understand.

When you are poor, spend money so that people can see it. When you are rich, do not show off. Just silently spend the money on yourself. When you are poor, you must be generous. When you are rich, you must not be seen as a spendthrift. Your life would have come full circle and reach its basics. There will be tranquility at this stage.

There is nothing wrong with being young. You do not need to be afraid of being poor. You need to know how to invest in yourself and increase your wisdom and stature. You need to know what is important in life and what is worth investing in. You also need to know what you should avoid and not spend your money on. This is the essence of discipline. Try to avoid spending money on clothing, but buy a selective number of items that have class. Try to eat less outside. If you were to eat outside, do make sure you buy lunches or dinners and foot the bill. When buying people dinner, make sure you buy dinners for people who have bigger dreams than you, and work harder than you.

Once your livelihood is no longer an issue, use the remainder of your money to pursue your dreams. Spread your wings and dare to dream! Make sure you live an extraordinary life!

Famous theory from Harvard: The difference of a person’s fate is decided from what a person spends in his free time between 20:00 to 22:00 . Use these two hours to learn, think and participate in meaningful lectures or discussion. If you persist for several years, success will come knocking on your doors.

No matter how much you earn, remember to split your salary into five parts. Take care of your body so that it will still be in good shape. Invest in your social circle so that you will constantly meet new people where you can learn new knowledge from. Expanding your network will also have an important impact in how much you earn eventually. Travel every year and expand your horizons. Also keep abreast with the latest developments in the industry. If you follow this plan diligently, you will soon see big surplus in your funds.

Whatever happened in the past is over. Do not dwell on past mistakes. There’s no point crying over spilt milk. Everybody makes mistakes. It’s what you learn from the mistakes, and promising yourself not to repeat those mistakes that matters. When you miss opportunities, don’t dwell on it, as there are always new opportunities on the horizon.

Being able to smile when being slightly misunderstood is good upbringing. When you’re wronged and you smile with calmness, it is generosity. When you’re being taken advantage of and you can smile, you’re being open-minded. When you are helpless and you can do a philosophical smile, you’re in a calm state. When you’re in distress and you can laugh out loud, you’re being generous. When you’re looked down and you can calmly smile, you’re being confident. When you’re being jilted in relationships and you can smile it off, you’re being suave.

There are many people who are struggling to make ends meet. It doesn’t matter if you are rich or poor. There are lessons for all to learn from Li Ka Shing.

10 Ways Rich People Think Differently

10 Ways Rich People Think Differently

• Libby Kane

• May 23, 2014, 10:34 AM

Microsoft cofounder and chairman Bill Gates, who is consistently ranked as one of the richest people in the world, speaks at the 2013 Microsoft shareholders meeting.

If you ask Thomas Corley, being rich has very little to do with luck and everything to do with habits.

Corley, who spent five years monitoring and analyzing the daily activities and habits of people both wealthy and living in poverty (233 wealthy and 128 poor, specifically), isolated what he calls "rich habits" — and many of them are simply patterns of thought.

"I found in my research that wealthy people are by and large optimists," he says. "They practice gratitude and look at happiness like a habit."

Corley, who presents and explains many of his findings in his book "Rich Habits: The Daily Success Habits Of Wealthy Individuals" and on his website, defines "rich people" as those with an annual income of $160,000 or more and a liquid net worth of $3.2 million or more, and "poor people" as those with an annual income of $35,000 or less and a liquid net worth of $5,000 or less.

Here are 10 ways Corley found that rich people think differently, based on statements with which they identify.

1. Rich people believe their habits have a major impact on their lives.

"Daily habits are critical to financial success in life."
Rich people who agree: 52%
Poor people who agree: 3%

Wealthy people think that bad habits create detrimental luck and that good habits create "opportunity luck," meaning they create the opportunities for people to make their own luck. "When I looked at luck," Corley remembers, "a lot of rich people said they were lucky and a lot of poor people said they were unlucky."

2. Rich people believe in the American dream.

"The American dream is no longer possible."
Rich people who agree: 2%
Poor people who agree: 87%

"The American Dream is the idea of unlimited potential, that you can make it on your own," says Corley. In his study, the vast majority of rich people believed that wealth is a big part of the American dream (94%), and that the dream is still possible.

3. Rich people value relationships for professional and personal growth.

"Relationships are critical to financial success."
Rich people who agree: 88%
Poor people who agree: 17%

Not only do rich people feel that their relationships are critical to their success, but they put a lot of effort into maintaining them, making a habit of calling up contacts to congratulate them on life events, wish them a happy birthday, or reaching out just to say hello. "When I applied the hello calls and the life event calls to my own life," recalls Corley, "I ended up making another $60,000 as a result."

4. Rich people love meeting new people.

"I love meeting new people."
Rich people who agree: 68%
Poor people who agree: 11%

Hand in hand with valuing relationships comes making new ones. Rich people both love meeting new people and believe that being liked is important to financial success (in fact, it's a whopping 95% that believe in the power of likability, compared to 9% of poor people).

5. Rich people think that saving is hugely important.

"Saving money is critical to financial success."
Rich people who agree: 88%
Poor people who agree: 52%

"Being wealthy is not just making a lot of money," explains Corley. "It's saving a lot, and accumulating wealth. Many of the people I studied aren't wealthy because they made a lot, but because they saved a lot." He's trying to instill what he calls the 80/20 rule in his own children: Save 20% of your income while living on 80%.

6. Rich people feel that they determine their path in life.

"I believe in fate."
Rich people who agree: 10%
Poor people who agree: 90%

Poor people are significantly more likely to believe that genetics are important to becoming wealthy, and significantly less likely to believe that they're the cause of their own financial status in life. "Most of the wealthy people I talked to were businesspeople who weren't always wealthy," Corley explains, "but they had this attitude that they could do anything."

7. Rich people value creativity over intelligence.

"Creativity is critical to financial success."
Rich people who agree: 75%
Poor people who agree: 11%

While rich people are more likely to believe that creativity influences success, poor people are more likely to think that being "intellectually gifted" is critical. They're also more likely to believe that wealth is usually accidental. "If you look at my stats, you'll find that a lot of wealthy people were C students," says Corley. "There's more to wealth than just being smart."

8. Rich people enjoy their jobs.

"I like (or liked) what I do for a living."
Rich people who agree: 85%
Poor people who agree: 2%

"Many of the wealthy in my study loved their job — it's not an accident," says Corley. In fact, 86% of the wealthy worked an average of 50 hours or more per week (compared to 43% of the poor), and 81% say they do more than their job requires (versus 17%). Corley says it's related to the idea of creativity being important to financial success: "These people found a creative pursuit that could turn into monetary value. When you engage in a creative pursuit that can make money, the rewards are often obscene."

9. Rich people believe that their health influences their success.

"Good health is critical to financial success."
Rich people who agree: 85%
Poor people who agree: 13%

"One of the individuals in my study told me 'I can't make money in a hospital bed,'" Corley remembers. "Wealthy people think that being healthy means fewer sick days, which translates into more productivity and more money."

10. Rich people are willing to take risks.

"I've taken a risk in search of wealth."
Rich people who agree: 63%
Poor people who agree: 6%

"A lot of the wealthy people in the study were business owners who started their own businesses," Corley explains. "They became successes because they were master self-educators who learned from the school of hard knocks." In fact, 27% of the wealthy people in Corley's study admit they've failed at least once in life or in business, compared with 2% of the poor. "Failure is like scar tissue on the brain," Corley says. "The lessons last forever."

9 Things Rich People Do Differently Every Day

9 Things Rich People Do Differently Every Day

Bottom of Form

from Entrepreneur.com 

July 1, 2014

What you do today matters. In fact, your daily habits may be a major determinant of your wealth.

"The metaphor I like is the avalanche," says Thomas Corley, the author of "Rich Habits: The Daily Success Habits Of Wealthy Individuals." "These habits are like snowflakes — they build up, and then you have an avalanche of success."

Corley spent five years studying the lives of both rich people (defined as having an annual income of $160,000 or more and a liquid net worth of $3.2 million or more) and poor people (defined as having an annual income of $35,000 or less and a liquid net worth of $5,000 or less).

He managed to segment out what he calls "rich habits" and "poverty habits," meaning the tendencies of those who fit in each group. But, Corley explains, everyone has some rich habits and some poverty habits. "The key is to get more than 50% to be rich habits," he says.

And what are those rich habits that are so influential? Here are a few:

1. Rich people always keep their goals in sight.
"I focus on my goals every day."
Rich people who agree: 62%
Poor people who agree: 6%

Not only do wealthy people set annual and monthly goals, but 67% of them put those goals in writing. "It blew me away," says Corley. "I thought a goal was a broad objective, but the wealthy said a wish is not a goal." A goal is only a goal, he says, if it has two things: It's achievable, and there's a physical action you can take to pursue it.

2. And they know what needs to be done today.
"I maintain a daily to-do list."
Rich people who agree: 81%
Poor people who agree: 19%

Not only do the wealthy keep to-do lists, but 67% of them complete 70% or more of those listed tasks each day. 

3. They don't watch TV.
"I watch TV one hour or less per day."
Rich people who agree: 67%
Poor people who agree: 23%

Similarly, only 6% of the wealthy watch reality shows, compared to 78% of the poor. "The common variable among the wealthy is how they make productive use of their time," explains Corley. "They wealthy are not avoiding watching TV because they have some superior human discipline or willpower. They just don't think about watching much TV because they are engaged in some other habitual daily behavior — reading."

4. They read … but not for fun.
"I love reading."
Rich people who agree: 86%
Poor people who agree: 26%

Sure, rich people love reading, but they favor nonfiction — in particular, self-improvement books. "The rich are voracious readers on how to improve themselves," says Corley. In fact, 88% of them read for self-improvement for 30 minutes each day, compared to 2% of poor people.

5. Plus, they're big into audio books.
"I listen to audio books during the commute to work."
Rich people who agree: 63%
Poor people who agree: 5%

Even if you aren't into audiobooks, you can make the most of your commute with any of these commute-friendly self-improvement activities.

6. They make a point of going above and beyond at the office.
"I do more than my job requires."
Rich people who agree: 81%
Poor people who agree: 17%

It's worth noting that while 86% of rich people (compared to 43% of poor) work an average of 50 or more hours a week, only 6% of the wealthy people surveyed found themselves unhappy because of work.

7. They aren't hoping to win the jackpot.
"I play the lottery regularly."
Rich people who agree: 6%
Poor people who agree: 77%

That's not to say that the wealthy are always playing it safe with their money. "Most of these people were business owners who put their own money on the table and took financial risks," explains Corley. "People like this aren't afraid to take risks."

8. They watch their waistline.
"I count calories every day."
Rich people who agree: 57%
Poor people who agree: 5%

Wealthy people value their health, says Corley. "One of the individuals in my study was about 68 and worth about $78 million. I asked why he didn't retire, and he looked at me like I was from Mars. He said, 'I've spent the last 45 years exercising every single day and watching what I eat because I knew the end of my career would be my biggest earning years.' If he can extend his career four to five years beyond everyone else, that's about $7 million for him."

9. And they take care of their smiles.
"I floss every day."
Rich people who agree: 62%
Poor people who agree: 16%

Enough said.

8 Money Mistakes to Avoid on Your Way to Being Wealthy by Grant Cardone

this is one is written by Grant Cardone

8 Money Mistakes to Avoid on Your Way to Being Wealthy

August 11, 2014

There is a difference between being rich and having wealth.

Wealth is the abundance of something in such surplus that no conditions can destroy it. Making a lot of money is one thing, getting rich another. Creating wealth, well, that’s what very few people ever learn. You have heard the expression "get rich quick," but you will never hear "get wealthy quick."

Ever hear the saying, “money never sleeps?” The wealthy take this literally and believe that money must work around the clock to grow. The wealthy respect and pay attention to their money knowing that nothing multiplies without attention. They also know money wants to be loved and acknowledged.

Sound crazy? Show me someone that doesn’t pay attention to their money or is disrespectful of it and I will show you someone lacking money.

The wealthy also avoid mistakes that big income earners and the rich make. Here are some common money mistakes you must avoid to create wealth:

1. Seeking comfort, not freedom. Comfort is the enemy of abundance and the most dangerous element of finances. The entire middle class is built on seeking comfort. The wealthy seek freedom and so much abundance that money is no longer dependent on their efforts. More is the mantra, abundance is the affirmation, comfort isn’t on their menu and freedom is the focus.

2. Diversification. You can never get truly wealthy by diversifying your investments. Wall Street has done a great job of selling the public on this idea of diversifying because it benefits Wall Street.

Mark Cuban says “Diversification is for idiots.” Andrew Carnegie said “put all your eggs in one basket and then watch that basket.” 

If you want to create real wealth learn everything you can about a space and go all in.

3. Depending on one income flow. No matter how big your income is, never depend on one flow. I knew an executive who was earning $350,000 a year, the top 1 percent of all incomes. Suddenly the industry she worked in came to halt and her one income flow was shut down. This has happened to many Americans, destroying trillions of dollars of "pretended" wealth.

To create wealth, you must make investments that will create dependable streams of income flows, independent of your main source of income. I use rental income from apartments and partnerships in other companies to throw off passive flows of income. I continue to pay attention to each of these flows to make them stronger. This is not diversification -- it’s fortification of wealth.

4. Comparing to others. Seventy-six percent of working Americans are living paycheck to paycheck. Comparing your finances to others will ensure you never create wealth. People often compare their situation to some starving nation in a remote part of the world to justify being "better off." Another person’s finances, good or bad, will not pay your bills, won’t fund your retirement and will not provide you peace of mind. Don’t compare your finances to someone else’s.

5. Investing in trends. Avoid investing in the latest and greatest technologies that can be displaced by new technological developments.

Warren Buffett invests in electricity, railroads, banks, insurance, soft drinks, food companies and candy.

Don't get on the roller coaster. Take the longer, slower ride that guarantees arrival.

6. Trusting without proof. The single biggest mistake of my financial life was naïvely trusting a group of people because I liked them and it felt right. I neglected to get proof that they were actually as they presented. Instead I went with my feelings and was deceived. By the time I figured out something was wrong, I was out millions. 

Disregard your feelings when it comes to people and always look for solid evidence. If you are so close to people that you are not willing to ask them to provide evidence, make it a policy not to do business with them.

7. Saving to save. It is impossible to create real wealth just by saving money. The banks only pays .25 percent, so it will take you 40 years to grow your money 10 percent if rates stay where they are. More importantly, money that sits around idle always seems to find an emergency to fund.

Dave Ramsey suggests you not carry cash or credit cards because when either is available -- you’ll create a reason to use it.

To guarantee my wealth, since the age of 25, I moved surplus money into future investments accounts that I could not easily access, so that money was available for investments when I finally had the knowledge and courage to do so. This kept me broke and having to hustle constantly.

8. Pretender spender. On the other end of the spectrum is the pretender spender. They try to impress others with how they spend money. It’s not their money, it is always someone else’s. Sports cars, expensive clothes, designer bags, shoes, V.I.P. tables -- the list is endless.

The wealthy are not trying to impress anyone, they are seeking freedom.

When the wealthy hit affluence and abundance, they start throwing money around on ridiculous things -- cars, boats, planes, vacation homes. By then, it no longer matters that the things are poor investments. The very wealthy may appear to be flaunting their money with extravagances, but in reality they are not. The money they are spending is miniscule compared to the abundance they’ve created.

Sounds good doesn’t it? So what will it be for you: middle class, rich or wealthy?

You know money won’t make you happy and just getting by won’t either. There is a price to be paid for whatever choice you make. Wealth provides you with options and the person that has options has freedom.

Save for the rainy days

Savings forecast: It will always rain

Last updated: Thursday, July 3, 2014, 12:17 AM

SAVING FOR AN emergency is supposed to be the key to establishing a financial safety net. Yet studies continue to show that people aren't putting their money away. The latest evidence comes courtesy of Bankrate.com, which on a monthly basis takes the pulse of how secure people feel about their personal financial situations.

Those of you who save and do it as easily as you breathe might not understand why having an emergency fund is still an issue for so many people. Nonetheless, 26 percent of Americans have no savings cushion, according to Bankrate.com. An overwhelming majority of Americans don't have the recommended six months of living expenses saved.

And who are the worst at saving for that rainy day?

Bankrate.com found people between 30 and 49 are more likely than any other age group to not have an emergency fund.

Here's something that surprised me about the latest savings results. Young adults are more likely to have at least five months of living expenses saved.

Yes, you read that right. The millennials, those aged 18 to 30 who we older folks complain are too entitled, are actually saving. But for good reason, says Greg McBride, Bankrate.com's chief financial analyst.

"They tend to have lower expenses," McBride said. "They don't have to put away as much because they are likely living at home with their parents or have roommates. People 30 to 49 are more likely to not have emergency savings because those are the years they have a house, two or three kids and a dog. But they need the emergency savings more than anybody."

It's not that people don't know they need to save, especially with the Great Recession a close memory.

"There has been an attitude shift," McBride said. "People recognize they don't have enough savings and know they aren't making progress. Savings is a consistent sore spot with consumers when it comes to financial security. But nothing helps you sleep better at night than knowing you have money tucked about in the event of unplanned expenses. Savings provides a critical buffer between you and high-cost debt or other financial distress."

Understandably, one obvious reason people don't have enough money saved is because they are struggling to cover their basic expenses.

But there's another barrier to saving.

"Americans have fallen out of the saving habit," according to a recent report by Oxford Economics sponsored by a group of financial and public-policy organizations.

Even before the recession, the savings rate in America was pitiful. It's better now at almost 4 percent but still not good enough.

"Projecting the current rate forward, and adjusting only for the aging of the population, we found that the saving rate will fall to an extremely low 3 percent in the 2030s," the report noted. "If Americans are not able to save a significant amount of financial capital, millions of working households will have to choose between working much longer, accepting a lower standard of living in retirement - or running out of money altogether."

I get so frustrated when people say they've saved up for their summer vacation even though they will admit to not having any emergency funds or very little. You aren't entitled to a vacation until you have a cushion for the things in life that happen - a major car repair, a broken air-conditioning system when the temperatures are reaching triple digits or a family emergency or death. You have to plan for the unexpected.

"Undersaving at the national level could also place the economy and government on an unsustainable path, marked by an ever-increasing external debt that could ultimately undermine financial stability," the Oxford Economics report said.

Are you alarmed now?

If not, you should be. We've got to become a nation of habitual savers, which is why I was so pleased to see so many young adults catching the savings fever early.

I've seen it with my own 19-year-old. She works during the summer and saves pretty much all she earns so she will have funds for the things she needs during the school year. This past year, her first year in college, she was always complaining that she didn't have any money. But she did. She had it in her savings, which she withdrew in a self-imposed monthly allowance.

"If you can start to save when your income is low and build the habit when income is low, it will stay with you as your income grows," McBride said.

If you are struggling with saving, consider what my grandmother "Big Mama" would always say to encourage me: "You have to save for a rainy day, because it's going to rain."

Michelle Singletary