The Wealth Game An Ordinary Person’s Companion Peter Alcaraz
Provision is a basic human instinct. It stems from our need to eat, drink, and stay warm. Money transforms the picture. Instead of having to make a shelter, grow your own food, and search for water, you can pay someone else to do these things.
It offers a different kind of self-sufficiency. And, even better, you can build a pot of money to provide long after you are too feeble or old to earn it by your own labour.
This presents a dilemma: How do you balance the rewards from a finite working life between today's and future needs?
- Work to afford daily demands but no more until you die or become dependent; at the mercy of charity or state, or
- Set aside money to achieve financial independence so that you can pay your way without working for money?
The dual premise of this book is that:
- Financial self-sufficiency is a worthwhile goal
- It is achievable far quicker than you might think.
Why worthwhile? It’s a seminal moment: release from the obligation to work for money that has probably defined your existence since early adulthood. A door opens, and, like stepping up a level in a computer game, you enter a higher phase of play, with time and space to pursue other interests and goals. You can tick the box marked “enough” and move on. The value of this depends on how much you buy into the idea that what you do in life is more important than what you have if you believe in it at all.
Presenting a case for the second contention is more involved and forms the meat of the book.
I am driven by the knowledge that financial mismanagement causes suffering, yet frustration is easily avoidable. Why is it such a common problem?
The first difficulty is that people, particularly older generations, don’t like talking about money. There’s plenty of moaning, blaming, and superficial banter but not much of any substance. The topic touches a nerve and stays shut in an elephant-sized closet, unavoidable yet largely ignored. This reticence is compounded by a general failure to educate people, both young and old, about finance and an apparent acceptance by government and society that financial illiteracy or a lack of capability around money is quite normal and too hard to cure.
Thrown into a noisy and confusing marketplace, many people fail to grasp basic financial concepts or any notion of medium-to-long-term strategy, and they make lifestyle decisions in a vacuum, with no commercial framework or bigger picture, only to be surprised or disappointed with where they end up.
A further problem is that no one sets out to make you wealthy, but many set out to define your needs—if you let them. Every player in the wealth game will take your share if directly given the chance, but clever ones go further and encourage you to give them what you are able to gather. Closer to home, family, friends, and acquaintances—in fact, much of society—urges you to join a competitive spending conspiracy.
Do you give in or stand firm and define your own requirements in isolation, letting the pressure groups whistle for their profit or support?
Stand up and fight—not for your right, because no one has a right to financial security, but for your share, because the money is out there if you want it. The game is a Darwinian exercise in survival, although the battle is not just against outsiders. When the Times newspaper asked G. K. Chesterton what was wrong with the world, he said “I am.” Provision and needs are opposite sides of a weighted coin. You can flip it randomly and let the house collect, or fix the odds in your favour by loading the coin to land provision-side up more often than the other way around. In other words, you can be sure that you generate more than you need. You can
manage your needs to win. In pursuit of self-sufficiency, why would you do otherwise?
This should be fertile ground for self-help, but it has not been. Is it still the case that few self-respecting individuals would buy or be seen with a personal finance guide? Is it still the case that, at least in the United Kingdom, the genre has failed?
The financial self-help industry has not helped its cause. What little product is available veers between academic and elementary step-by-step guides with not much in between. A number of the evangelical classics are showing their age, and many how-to books are hard to implement in practice. The trickery is often well disguised but follows familiar patterns.
Get Rich Quick
Buy property, shares, or other assets cheaply at a discount to their real value.
Sell before you buy, so pre-agree to a sale before you commit to paying, eliminating risk and guaranteeing a baked-in profit.
Use a vendor loan as equity funding for your new debt package so that you don’t need to put up any cash of your own. Fund your purchase with cheap external credit or on a buy-now, pay-later basis.
Start a Business Empire
Obtain start-up funding without giving away any (or much) equity.
Be extraordinary, one in a million.
Be young and energetic.
Have nothing to lose.
Audit Your Way to Success
Record every financial transaction in your life; perform a rolling audit, and become a full-time accountant. Calculate a cost or value for all activities, and act accordingly. Get-rich-quick and be-an-entrepreneur books, like muscle-men manuals, tend to eschew any activity that might be seen as prosaic or pedestrian, like employment, saving, and mortgages, and in doing so, they rule out the vast majority of the population. Money-management guides frequently combine tortuous codes of practice with endless, time-consuming administration, delivering spurious science of little use to anyone that’s more likely to frustrate and confuse.
There are, of course, some excellent textbooks and study aids, but for people who don’t yet appreciate that they should have an interest in the subject, let alone know what they are looking for, these might as well be stored in the ancient-foreign-language section.
Perhaps there is hope yet. Not long ago, few would admit to meeting their partners with outside help, but Internet dating is now a commonplace and accepted practice. Solutions for sexual problems are available at the press of a button and make popular television and radio material. There is an index for happiness and gurus galore while the merits and demerits of religion have been so much debated publicly that the whole subject seems to have passed its sell-by date. Even death is creeping onto the forum.
To make progress in finance, individuals must open up, education must step up, and the self-help industry must grow up in a collective push for higher standards of financial capability.
This little book is a call to action for the independent-minded and aims to stimulate frank and open debate about money; a hunger to investigate and learn more about personal finance, and better thinking better decisions and energetic implementation.
It doesn’t have all the answers—no book could—and it certainly isn’t a step-by-step guide to anything. It’s a travelling companion, a friend to inform, challenge, and annoy but always support and inspire you. Throw away off-the-shelf route maps, because, in the wealth game, you cut your own path. There is no congestion, and you can journey far without meeting another person. The book is a personal offering inasmuch as it originates from my own direct experience and knowledge rather than academic research, someone else’s views, or received wisdom. My working life was one large implementation exercise; there was no time to read about the subject or reflect, nor was there an obvious need to, since the plan consistently worked.
Only in the course of gathering my thoughts and writing have I begun to explore what others have said and done, and I’ve found that I was never quite as alone as I felt, that minds far greater than mine have wrestled with many of the same issues and described them beautifully. A light came on, the sense of isolation disappeared, and I found a family of thinkers spanning thousands of years. The few quotes and passages included are no more than a taste, and I am aware that I have only scratched the surface. They are here not to
impress but to interest you.
None of the underlying philosophy is original; it is tried, tested, and proven. Just as importantly, it is universal, is not selective or exclusive, and belongs to no particular club or another. There is no magic, mysticism, or moralizing; no dogma or politics; and no right or wrong answers, just cause and effect—natural consequences to actions. Psychology, on the other hand, is largely homespun, although there are selected references to established ideas and research, again dug out to support my own existing theories rather than to inform them.
As an impartial amateur in both areas, I feel free to speak plainly and roam anywhere. I have no reputation to maintain or side to support. I am interested only in practical results and the avoidance of waste, fuss, and any kind of deception or dishonesty.
As to finance, the book starts from a position one step up from elementary—so don’t expect basic cash-flow and budgeting mechanics—and moves to the quite advanced. I take some of the foundational principles of finance and explore them in practice.
Part one previews the game and introduces many of the central themes, including the all-important prize. In part two, the book becomes interactive and invites you to check your current position and prospects. Where do you stand? Before moving on, your temperament, self-discipline, and commercial nous are challenged in part three as part of early skill-building. Here, concepts borrowed from philosophy and corporate finance are explained and illustrated to show how they directly bear on your life decisions and how the financial
consequences of your actions are largely foreseeable. It also includes a framework and techniques for maximizing your available cash and toughening up.
Part four, “Building the Pot,” addresses a vast subject and can only be an introduction to it, although my intent has been to add meat (or at least protein) while recognizing different reader appetites. In a wealth companion, it’s impossible to avoid the questions of where to put your cash and how to evaluate common asset classes. For some, this will be a stretch; for others, a recap. Throughout, I have tried to add fresh perspectives and viewpoints, recognizing that there are reference books available that cover the facts and theories in detail and that the landscape is constantly shifting.
Two wealth creators and destroyers are debt and compounding, and there is a separate chapter for each. Debt, seen as public enemy number one, is rocket fuel if handled correctly while compounding, its quiet, independent-minded accomplice is a force of nature to be harnessed, yet nowhere near properly understood by most outside the world of money. If you only read one chapter, let it be this one.
Part four continues by making the case for attribution (matching your assets to different needs in order to build a pot fit for purpose), and while the book is peppered with techniques for achieving financial self-sufficiency, it also outlines a few proven wealth-building strategies. It concludes with thoughts on managing your assets.
Part five takes on the bloody subject of obstacles and calamities and asks, “Where’s the catch?” Surely there must be one if not many; otherwise, we’d all be financially self-sufficient! Pitfalls abound, but they are not all as troublesome as they seem.
Finally, part six helps you answer the question “Have I won?” and, if you haven’t, “How far do I have to go?” I invite you to run the “NAN test,” a new DIY diagnostic whose instruments will by now be familiar. At the editor’s suggestion, I have included a glossary of terms used in the book, some pre-existing and some new. The extent of this in itself underlines the linguistic and technical challenges facing the ordinary person in the game, and a cursory glance is not a bad way to begin.
To get the most out of this book, you need access to a computer and Microsoft Excel software to make spreadsheets. I’d also recommend that you buy a financial calculator and use it as you go. My favourite is the HP 17 bII +; its instruction book alone is an education in practical finance.
Finally, what authority do I claim? Thirty years in and around finance and a “particular set of skills,” as Liam Neeson would say, but more importantly, I won a tick in the box marked “enough” at the age of forty-six.
Equipped with an education, an overdraft, and a certain will, I set out to reach financial independence, and, twenty-four years later, I arrived. Wherever you are on the journey, this book will help.