Road to a Million

The recession is hitting many of us hard.  We look at our retirement accounts and see that they're significantly smaller than they were before.  I've got a few years to go before retirement, but many people don't have that luxury.  Today, I was at an office furniture store and met a man, Bill, who, after a very successful career, found himself on the sales floor.  He had looked at his 401K and there just wasn't enough there.  His wife, who retired after a 20+ year career with IBM, found herself in the same position.  Bill works for the office furniture store four days each week and then works with his wife at the antique shop where she works another two days each week.  He seems happy about it, and some studies say work may help him live longer.  That's a choice that we would hope to make freely at that age, not under duress.

While many, like  look to traditional brick-and-mortar type businesses to supplement their incomes or retirement funds, others are stepping out onto the digital frontier.  Internet based businesses are sprouting up everywhere.  People can make a good living online, in part, through affiliate programs.  The Associated Press reports on a man who makes $80,000 each year through affiliate marketing.  More than half of that is coming from a single affiliate -- Amazon.com.

Individuals are not the only ones who are feeling the pinch of the recession, though.  State governments are hurting for money and looking for places to find revenue.  For years, online retailers have been exempt from charging sales tax for online purchases, with a few exceptions.  Typically, the exception is for states where they have a physical presence.  

Now, legislatures are looking to the affiliate programs as a potential cash cow.  Several states, like North Carolina, Hawaii, and Rhode Island, are looking to require online retailers to charge sales tax in any state where they have an online affiliate marketer.  For retailers like Amazon.com, there are few states where they do not.  As a result, these businesses are cutting their losses and ending their affiliate programs in those states.  Where they were once looking to increase revenues, they are losing revenues. 

One of Aesop's fables was about a dog to whom the butcher had thrown a nice juicy bone.  As the dog crossed a bridge over a pond, it looked down to see another dog, with a nice juicy bone. That bone looked even bigger than the one he had, so the dog barked at the other dog and sprang from the foot bridge after the other dog.  When the dog made its way back to the shore, he found himself wet, muddy, and without any bone what-so-ever.

Whether you're an Internet entrepreneur or not, watch your state's legislative agenda carefully.  Using affiliate marketers as a way of scaring up revenue will undoubtedly backfire.  Small businesses will find themselves without affiliate programs.  Along with not realizing sales tax revenues, the states that make these moves will lose the business tax revenues on the small businesses that are in the affiliate programs.  When all is said and done, we'll all be wet and muddy.

Don't be shy telling your elected officials what you think about this.

Read more about this:

[AP] Web retailers, states tussle over tax rules

[WSJ.com] Overstock Reverses Plan to Drop Calif, Hawaii Associates

[Reuters] Amazon, Blue Nile sever Web affiliate programs

[Honolulu Star-Bulletin] Amazon poised to cut affiliate program in Hawaii

Right now, it seems like forever ago that I setup my brokerage account, but yesterday was the first time I actually executed a trade.  It took a while, but last week I finally got the rollover disbursement from my previous employer's 401K account.  When I logged in last Friday and saw it all sitting there as cash, I realized that I better get studying.

On June 5, Market Watch reported that, for the seventh month in a row, Americans paid off more debt than they took out.  We should all give ourselves a collective pat on the back for that.  Its great.  The numbers are mind boggling.  In March, the collective debt dropped $16.6 Billion.  In April, it dropped another $15.7 Billion.

How do I go about getting rich?  Sitting around and thinking about it won't get me very far, that's for sure.  Still, there is an inner component to getting rich.  Lately, there's been a lot of talk about the Law of Attraction as made popular by the movie The Secret.  Some reject it as new age snake oil.  I admit that, for a while, I rejected it as a slick marketing vehicle.  When I finally sat down and watched it, my opinion changed significantly.  But this is not entirely about The Secret.

In his book, The Millionaire Mind, Thomas Stanley looks at the characteristics of Millionaires.  Working hard was fifth on the list of success factors.  Making wise investments wasn't even in the top ten.  The top three factors, however, were honesty, discipline, and sociability.  Others like Napoleon Hill and T. Harv Eker seem to agree  Their writings focus on the inner elements of wealth.

Beyond the inner game, there are the practical steps of getting rich.  Let's assume that I'm interested in real wealth, as reflected on a balance sheet, not just income.  That would mean I can increase my wealth by lowering my liabilities (debt) or increasing my assets (wealth).  Let's also assume that only legal options are on the table.  Those could include increasing income from work or business, investment income, winning the lottery, or anything else of that sort.

That leaves me three areas of focus:

1. Inner Game
2. Debt Reduction
3. Income Growth

Those are the three areas for focus right now.  I'm a pretty visual thinker, so I need a structure like that to serve as a map for what is to come.  This will probably evolve, but it's a good start for now.

I remember opening an account on eTrade.com about ten years ago and it wasn't too bad.  Today, I finished opening my account on thinkorswim.com and I have to admit being a bit overwhelmed by the experience.  They expect someone to read and sign a mountain of agreements with mind boggling, semi-comprehensible, legal-ease.  I printed some of the agreements, but not all of them.  The list of forms includes:

• AMEX Agreement
• CME Vendor Agreement
• IRA Financial Disclosure
• IRA "Simplifier"
• NASDAQ Agreement
• NYSE Agreement
• OCC Disclosure
• OPRA Agreement
• Penson Privacy Agreement
• Roth IRA Agreement
• Roth IRA "Simplifier"
• Signature Cards

I am going to wait until I can get a live person on the phone before I start funding my account.  I have funds in other places, but I want to consolidate it all into one place so that its easier to take care of.  There's also the matter of account maintenance fees.  The brokerage I'm using doesn't charge any.  The two companies where I have Roth IRAs charge $10-15 each year in maintenance on top of their 12b-1 fees.  That seems silly to me. Well, I'll take a deep breath and plug away at it again later.

I have to admit that, despite my initial enthusiasm, it has been slow getting started down this road.  There has been a lot of housekeeping stuff to take care of.  I was saving for a new computer, so that I could do this effectively.  Racking up consumer debt would be a move backwards.

Stood alone on a mountain top, Starin out at the great divide I could go east, I could go west, It was all up to me to decide Just then I saw a young hawk flyin' And my soul began to rise And pretty soon My heart was singin' - Bob Seger (Roll Me Away)

A few months ago, I decided that I was tired of the status quo in my life. Here I am, in my early thirties, and I'm not exactly happy with where I am at. I've got a significant amount of student debt. I think about taking a vacation and get anxious because I don't want to have to put it all on credit cards. Money gives me anxiety, plain and simple. Still, there is a quality of life that I want to achieve. Some of it is materialistic, I admit. There are things that I want to have. More importantly, there is a lifestyle that I want to achieve so that I can enjoy my time and my family. I want to explore more than the five-mile stretch of highway between my one-bedroom apartment and my corporate cube-farm. I grew up in a town where people generally had a lot of money. My grandfather was a doctor and many of his friends were doctors. I lived on the less affluent side of town and knew we weren't as well off as many of my friends. My family didn't go to Mexico, Hawaii, or the Caribbean for spring break. We didn't get to go to Europe over the summer. I rode my bicycle to school, even in high school after many classmates had their own cars. My childhood was not miserable. I had a loving family, good friends, and a supportive community. At this point in my life, though, I could barely afford to buy a house and live there. I still can't afford to take exotic vacations, and I worry about my money. I'm only a little past living paycheck to paycheck, but it wouldn't take much to upset that apple cart. I don't remember the exact moment, day, or time when I made the decision. Like Seger, standing on the mountain top, I realized that I could go east or west and it was my decision. One way was the path of the status quo in my life, which feels much like mediocrity. The other way is the path that will be an adventure. And so it is that I decided to become a Millionaire. This blog is the story of my journey, in real time.