Does anyone remember this great definition of money from the authors of the classic book Your Money or Your Life (Joe Dominguez and Vicki Robin, 1992)?

I bought this book about four years ago, read it, quickly forgot about it. I’ve picked it up again recently by a chance browsing through my local library. I think I like it even more this time. And I realize that this is the concept that I was trying to move towards in calling my blog MoneyEnergy.

Dominguez and Robin say that the “one consistently true statement we can make about money that will allow us to be clear, masterful and powerful in our relationship with it” is the idea that

“money is something we choose to trade our life energy for.”

“Our life energy is our allotment of time here on earth, the hours of precious life available to us. When we go to our jobs we are trading our life energy for money. This truth, while simple, is profound… Life energy is all we have. It is precious because it is limited and irretrievable and because our choices about how we use it express the meaning and purpose of our time here on earth” (54-55).

So I just made a list of all the jobs I can remember having done so far in my life. It’s an interesting exercise if you let it see where it takes you. I’ve had many different types of jobs, many of which I felt were frustrating and/or unimportant at the time. It presents an interesting picture of what I’ve traded my life energy for. I see now that in many of the cases, if I remember how I took a certain job, I was often doing it based on what was convenient or easy or what just happened to “fit” at the time. I’m much more conscious of what I will trade my waking hours for now.

Most of us buy money with our time. We put actual hours in at work. We trade our time - our life energy - for the pieces of paper and coins we call money. What will you use this money for? It should represent a fair trade on your waking life. Are you squandering away your waking life? Does your life energy dissipate - so that you don’t know where it all goes?

The authors have a complex 9-step plan for becoming more conscious of and controlling your life energy. But here are two simple steps: record every cent that comes into your life, and every cent that leaves your life. Do this at least for one month so that you can clearly see where your life energy is going. Does it represent what you really want to do with your life? Is this what your life should be traded for?

The other exercise is to calculate the actual amount of $ you earn from your job and turn it into a dollar per hour amount. Include the time it takes you to get ready for work, to “relax” after work, to shop for clothes to wear to work, etc. etc. This will be your “real” salary, what you’re really trading your life energy for. You might see now that it’s even more important to be sure that you’re giving up your life for what it’s really worth.

What do you think? Have you read this book? Do you have similar thoughts or solutions?

This past weekend I was in my local library and perusing through the financial section when I picked up Jim Cramer’s Real Money (2005) and Mad Money (2006) books. I’d heard obliquely of Cramer before, but, I think because historically I’ve been so focussed on “DRIPPING” as my sole investing strategy, I’d never had much need for diverse theories about how to invest in stocks. It was just simple: enrol in a good ten DRIPS and you’re set. My DRIPS are already very well diversified. It boggles me that some authors (and apparently a lot of radio listeners) find diversification such a hard issue to comprehend or get down.

Cramer spends a lot of time in Real Money going over how to properly diversify. He provides a list of his ten recommendations, his ten stock picks, for beginners or those who just want to retool their equity portfolios.

Cramer’s Top Ten Recommendations

1. Buy a local company. Something in your neighbourhood or area that you can talk to people about because they work there, or have friends there, or because you regularly use their product or service. Cramer’s big on making sure you talk to people before you make your stock selections. With the internet, we’re all too quick to hit “buy” without having the “brake” that comes with having to air your idea out on someone else. Of course with DRIPs, it takes so much time and paperwork (relatively speaking) to enrol in one, that you’ve had quite a bit of time to think about it - it’s not as easy as just clicking away in your discount broker’s order-window.

2. Buy an oil stock. This wasn’t as much of a no-brainer back in 2005, apparently. It is now. Choose from Exxon, ChevronTexaco, BP, ConocoPhillips. If you’re unsure, where do you buy gas? Well, try to buy that company. Oil does well in all markets.

3. Buy a brand-name blue-chip that has a yield of at least 2.5%. This way the higher yield affords it some protection in case the sky falls down. I guess the rationale is that if the company gets into trouble, at least it can cancel its dividend in order to pull back some needed money. That makes sense to me. It’s another great reason for loving dividend stocks.

4. Buy a financial stock. Like a bank or savings-and-loan. Again, here in Canada, anyway, that’s a no-brainer. Canada’s banks have more cash than they know what to do with. And Canada’s economy is even more so dominated by financials probably than even the U.S. is, simply because its economy is less diversified. But in the U.S., Cramer recommends a local bank if possible. You use it, why not own it. You’ll be more familiar with its moves and operations. At this point, you have to make sure you stay diversified. If you buy local here, AND your company is a blue-chip, you’ll be collapsing three different categories from Cramer’s menu…

5. Speculate on one potential hot growth stock. The next Microsoft or Home Depot, as he says. He knows you want to try this anyway, so you might as well set aside 10% to do it - but no more than 20%!

6. Buy a “medicine-chest and fridge” stock. One of the soft-goods secular growth stocks: Proctor and Gamble, Colgate-Palmolive, Gillette, etc. Whatever has big shelf-space in the supermarket.

7. Buy a high-quality cyclical stock. Something like Dow, Deere, Boeing, United Technologies, DuPont, Caterpillar, etc. He says these stocks always get beaten up throughout the year, and if you wait long enough, you’ll find a bargain. I just checked out 3M and it turns out they’re trading near their 52-week low. Good time to buy.

8. Own some technology company. It’s riskier not to. Cramer says he’s so conservative that he makes sure he gets a tech company with some yield. That makes a lot of sense to me. As I’ve said before, I still don’t understand the logic of buying Google and Apple et al. with no dividends and insanely high PE ratios (for me). “If you think that I am being too stodgy, you have an easy choice: make your tech stock your speculative stock.” Again, Cramer’s making good sense here.

9. Buy a retailer that hasn’t yet expanded fully throughout the country, “and has preferably saturated only one region of the nation on a march to national status.” Cramer thinks that once the retailer is everywhere, and has stopped geographic expansion, it becomes a poor investment. He includes Wal-Mart in the latter camp. Right now Cramer likes Cabela’s “because it is a high-end camping and hunting store that could go for years before it saturates the landscape.”

10. Buy a “hope for the future”, non-tech, mid-cap stock from the S&P 600. He suggests a biotech company. Something that will turn out to be the Amgen and Starbucks of tomorrow. The S&P 600 is the “proving ground” for the S&P 500, he says, “a natural place to hunt for some good names.” If you need help, pick something from the New America Index in the Investor’s Business Daily. This last category doesn’t make as much sense to me. It sounds like another speculation. Perhaps Cramer just wants to focus on the mid-cap range. I’d consider this a mid-capper, with aims to grow into the S&P 500.

Not exactly rocket science, this list. But every Wednesday Cramer gets calls into his radio show and they play “Am I Diversified?” and Cramer apparently knocks many of them down. I’ve never heard or seen his shows, so I don’t have any real opinion about it, except amazement that there are that many people who don’t understand diversification. On that note, one thing that might strike you as a bit odd about this list of Cramer’s is that it doesn’t seem to include any non-US stocks. That’s a big no-no, and you shouldn’t have to ask why. I would slide some foreign stock into categories 5 and 10 - actually, you could slide a foreign stock into any of those categories. If you look at category 9 and think of China…. boom! Fireworks.

What about you? Cramer fans?

I’m talking about Robert Kiyosaki — the author of the Rich Dad, Poor Dad series — and his
great boardgame, Cashflow 101. You can still buy this game from his own site and from Amazon.

I remember going to a couple of Cashflow 101 games when I was an undergrad. There were about 7 or 8 of us, I was the only student, and it would take only a couple of hours before someone made it out of the rat race. It was fun, a little inspiring. I was about to organize a Cashflow group on my own, and even went to buy the Cashflow game once myself - the first time my order was misplaced, but then I never got around to trying to fix it and put the order back in again. Probably because I just didn’t have enough left on my Mastercard at the time!

These days it seems some investors are not as impressed with Kiyosaki as they were four years ago. For whatever reasons, some don’t agree with all of his basic ideas - some people aren’t interested in real estate - some don’t think the quest for wealth should occupy centre stage in the same way as it does for Kiyosaki. What about you? Did you ever read any of the Rich Dad books? Why/ why not? It seems that sooner or later, investors always try to come to terms with Rich Dad:). It shows that Rich Dad, Poor Dad has become a classic just like Malkiel’s Random Walk Down Wall Street. I would spend a few afternoons in the public library devouring his book, taking notes on it, and coming back to finish it all up.

I’ve read many different kinds of finance and investment books, but I think that what Rich Dad did for me was make the whole wealthbuilding process intelligible. (This might not be saying alot, since I know the book was written in an overly simplistic format:).) What I mean is that I got that “a-ha” feeling: when you finally figure something out, or when the bigger picture clicks. I think I was able to see a road map of some sort after reading the first five books in his series. But I haven’t kept up with all the books that he writes with his partners or which his colleagues write under the Rich Dad brand.

It would be great to hear from other Kiyosaki fans. Have you gone to any of his lectures? Do you still play Cashflow 101 or 201 or participate on any of the RichDad forums? The game is expensive, but I remember it being well worth it.