# Formula to Wealth



## Hawke (Jun 21, 2007)

Greetings All,

What do you think is a formula to wealth? (assuming you didn't win the lottery, your not a trust fund baby, and nobody you know is wealthy).

Which vehicle would you prefer:
*College education?*
The higher the degree the more you get paid, plus it opens doors of opportunity.

*Real Estate?*
Flip, fix it up, hold and let the value go up over time, tax shelter, rent it out, Roth IRA or 1030 exchange.

*Stocks?*
playing the market by purchasing stocks during corrections and using stops to put some financial brakes on.

*Doing what you love?*
Teaching, performing, writing, creating, traveling, eating, etc (running a website..hehe).

*Paying yourself 10% first?*
Saving up for investments.

Maybe use them all.  Any other vehicles you can think of?


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## CoryKS (Jun 21, 2007)

If your company offers a 401K, max it out.  Or at least contribute enough to get the full employer match.


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## Kacey (Jun 21, 2007)

Any or all of the above _that you can stick with_ - having a great plan that you can't keep to doesn't do any good at all.


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## shesulsa (Jun 21, 2007)

Hawke said:


> Greetings All,
> 
> What do you think is a formula to wealth? (assuming you didn't win the lottery, your not a trust fund baby, and nobody you know is wealthy).
> 
> ...


Use as many as possible but the real key to getting ahead is what very few people really want to do and that is _*live well within their means.   *_Everybody has to have cable, the latest phone with the coolest ring tones they BUY, the latest technology, the latest fashion, designer drugs, Starbucks in their hand.  I haven't had cable in over ten years - and, no panic now ... my kids ... are still ... breathing.

Second-hand store clothing is FINE for us - especially the boys and the laborer who works in sand and mud all day.  We spend more money on the good-impression clothing, good shoes, a really good dentist than on everyday items which are  bound to break when you look at them even though they cost you over a hundred dollars.

It's called Delayed Gratification.

Other than that, whichever of the above very good suggestions you follow, you must follow it/them smartly.  The degree you get should be broad if possible and supplement it with concentration study courses - that's right, extra classes.

Real Estate is a LONG TERM INVESTMENT money maker reliant on market swings unless you already have truckloads and are a professional developer.  I know because that's my gig.  It's also labor-intensive.

Stocks have some hallmark strategies that work okay for conservative investors and some risky strategies that work well for a few very talented high-risk investors.  There are newer options lately which can be very beneficial and middle-of-the-road, fairly reliable profit gainers.

Doing what you love rarely got anybody stinkin' rich unless they caught society and Mother Necessity at a good time.

Paying yourself first is another crucial factor, I believe.  From the first day of employment or any monetary acquisition, kids should learn the squirrel philosophy.  Further, earning what they really want and making them work to pay for things will teach a strong work ethic and an appreciation of earning funds.

I love to hear certain people say, "There are more millionaires today than there ever have been."  It's interesting because being a millionaire today doesn't mean what it did in the 50's, 70's or even the 90's.  To be that rich today you'd have to be a multi-millionaire.


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## Eternal White Belt (Jun 22, 2007)

The main ingredients for building wealth are:
1)  No debt.  (That means no borrowing from any lending institutions, and absolutely NO CREDIT CARDS!)
2)  Invest for the long term.  (Get rich quick schemes rarely work.  And rich people don't buy lottery tickets.)

http://daveramsey.com


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## stickarts (Jun 22, 2007)

All good comments!
If you can become financially wealthy doing what you love then to me that is a great way to live!
Living within your means, as mentioned, is very important, I see many who claim poverty but always have money for the newest toys and gadgets! 
I think living within your means, doing what you love, living up to your own standards, and living and sharing many laughs is wealth!


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## Yeti (Jun 22, 2007)

Eternal White Belt said:


> The main ingredients for building wealth are:
> 1) No debt. (That means no borrowing from any lending institutions, and absolutely NO CREDIT CARDS!)
> 2) Invest for the long term. (Get rich quick schemes rarely work. And rich people don't buy lottery tickets.)
> 
> http://daveramsey.com


 
I think #1 is a bit unrealistic. I don't know of many people who can purchase a car or a home without having to borrow money. I think a better way to phrase that is having only "good debt". There is such a thing as good vs. bad and while you do want to minimize your total debt, having some is not a bad thing. And actually, I think most lending institutions WANT you to have some type of debt (credit cards) as it establishes a credit history.


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## Yeti (Jun 22, 2007)

stickarts said:


> I think living within your means, doing what you love, living up to your own standards, and living and sharing many laughs is wealth!


Well said! Too many people look at what everyone else has and forget about all they've got!



shesulsa said:


> I haven't had cable in over ten years - and, no panic now ... my kids ... are still ... breathing.


 
Nor have I...well at least for the last few years anyhow. People always look at me funny when I say we don't have cable/satellite. I get the "how can you live without it" look. It's kind of funny.


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## Senjojutsu (Jun 22, 2007)

Some good posts already. While the bookstores are full of advisors with books on how to beat The Market here are some more practical (tactical) things you can do in your own life.

1) Maintain your personal finances on software, such as Intuit Quicken or Microsoft Money, but for this to really work for expense analysis you must maintain a Cash Account, that is, that $100 ATM draw from the Checking Account goes into the Cash Account and then all your cash purchases are to be posted (rounded to the dollar, such as food, beer, gasoline etc). It is daily work, but at year-end you will see where your money went.

2) Avoid addictions / obsessions / compulsions. To state the obvious crack addicts and boozehounds really dont do well financially, however if 29% of your disposable income is going into your hobby of ________ is this a good financial thing? Excluding of course if the 29% is being spent of your Martial Arts study!


3) If at all possible avoid the *D word* during your life, which does not help with the goal of lifelong accumulation of assets. Yes Divorce for the male(and even female) of the species is bad financial news. If the D does happen - then what you REALLY need to avoid is the Double-Divorced Dad syndrome. Then you are supporting 2.5 households. Your two ex-wives and your children (i.e., alimony/child support) and that hovel you are now forced to live in. A Bankruptcy event is easier to recover from than this D.D.D. scenario".


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## michaeledward (Jun 22, 2007)

No Credit Cards. 
Pay Cash.
Get Rich Slow.
Have an emergency cash fund of 3 to 6 months expenses.



I would stay out of the stock market, except to invest in broad based mutual funds.

I would stay out of real estate flipping, unless I had a passion for the reconstruction work; Manufacturing is adding value. But, I think there is too much downside risk (ask the Vegas flippers)


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## michaeledward (Jun 22, 2007)

Yeti said:


> I think #1 is a bit unrealistic. I don't know of many people who can purchase a car or a home without having to borrow money. I think a better way to phrase that is having only "good debt". There is such a thing as good vs. bad and while you do want to minimize your total debt, having some is not a bad thing. And actually, I think most lending institutions WANT you to have some type of debt (credit cards) as it establishes a credit history.


 
I like the idea of what you are saying here, although some of the specifics I don't like as much.

A car is a lousy reason to assume debt. It is a depreciating asset. Due to the cost of vehicles, it is often unrealistic to assume one can acquire a reliable vehicle without a loan, but there are options to do so. You can buy a used car, with the intention of spending a certain amount on maintanance. 

A house is usually a good reason to assume debt; if it is your primary residence. As an asset, it is likely to increase in value over the term of the loan. 

And, what financial institutions 'want', is not always in our best interest.


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## Brian R. VanCise (Jun 22, 2007)

Diversification and living within your means.  These will all allow you to progress and gather wealth.


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## Yeti (Jun 22, 2007)

michaeledward said:


> I like the idea of what you are saying here, although some of the specifics I don't like as much.
> 
> A car is a lousy reason to assume debt. It is a depreciating asset. Due to the cost of vehicles, it is often unrealistic to assume one can acquire a reliable vehicle without a loan, but there are options to do so. You can buy a used car, with the intention of spending a certain amount on maintanance.
> 
> ...


I agree and yet disagree with this...

I do hear your point, and while I agree that a car is not necessarily a good reason to assume debt as it is a depreciating asset, many times it can not be helped. My car now, for instance, is rapidly aging and is needing more and more repairs that I am finding it harder and harder to make. When it goes (which hopefully won't be for a long time yet) I am not in any kind of position where I can buy a "new" car (whether used or brand new) without assuming debt. Ideal?...not at all, but there are worse things to incur debt on. 

This is where having an established credit history is in your best interest. Having a good credit history - which means you have debt and have shown your abiltiy to pay it - is very desirable as it will dictate a lower interest rate on your loan.  The lending institutions like to see it too since they know they'll get their money back (i.e. no foreclosures).


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## SensibleManiac (Jun 22, 2007)

It's nice to see a question like this in a Martial arts forum. I honestly believe there's nothing wrong with attaining wealth as a matter of fact I believe in abundance and believe that it's everyone's RIGHT to be wealthy if they choose. 
All of the questions you've written can possibly lead to wealth. 
The most important one though I believe is Doing what you love. 
When you think about it, if you find the stock market incredibly boring then no matter how hard you try it's going to end up difficult to make money. 
Doing what you love and helping others are key points. I honestly used to think that these two were just new age pop psychology garbage meant to suck people into doing charity. That is until I tried them! 
Everything that earns me money today comes from 2 initial things. 1) I love doing it and 2) would do it for free. I do something for all my clients for free with NO strings attached, in other words I add value and help others get what they want for nothing. Some people feel this is alot of work, but I love doing it. It's alot of fun and when people tell me how much it's meant to them, WOW, I think that's the greatest reward, the feeling it gives me is something no one can take away. I'm currently working on several new free programs that help people out because these have worked so well for me. Yes I DO make money because eventually some of the people who see tremendous growth from my free help end up saying, Hey your work has helped make such an improvement I'll gladly pay you for more help. 
So in the end the free work I love to do is my form of advertising, Yes, but it works wonders for people and even when they don't end up as my customers they still thank me and that in itself is something that I wouldn't trade.
My advice, as woo-woo as it might sound is do whatever you choose to do as sincerely and lovingly as possible. Ask yourself, how can I express love and gratitude to as many people as possible and give them something of value? 
I dare anyone out there who wants to knock this approach to honestly try it for themselves before they speak out against it.  I think you'll be very surprised.


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## Ping898 (Jun 22, 2007)

I think the first thing you have to do is determine what you consider wealthy, when you want to be wealthy and what you want to do with that wealth.  I am by no means wealthy, but am doing better than most people my age (who don't live at home with mom and dad) and have a good amount saved up and invested in taxable and non-taxable accounts, but that said, I am planning a trip next March to Ireland.  It is a trip I have wanted to take for the last several years and when the time comes, I will sell off a few securities to pay for it.  There is no point to saving and trying to get wealthy IMO just for the sake of it.  So the trip will probably cost me 2 or 3 thousand by the time I finis, but it is well worth the expense and the "lost" wealth I would have earned had I kept the shares I will be selling.

As for me, I see money as a means to an end, not the end itself.  I am college educated and going for another degree, I invest in the stock market, max out my work matching on retirement and throw in a little extra, I (the bank) own my own home, though will next do the buy and flip game and though I could go out and probably add a good 20 to 30k to my salary working for another company, I have a job I like a lot with a company that takes very good care of me.  I also own a car and I bought it new, since I plan on running it into the ground I consider it a good investment because I know it's history, all except the first 15 miles I put every mile on the car and I don't have to worry about any surprises like an unreported accident coming back to hurt me.  In the end I save a lot, I admittedly have some credit card debt I am working to pay off because I see the value of keeping my investments where the are instead of selling to pay off my mistakes, but if all you are doing is creating wealth at the expense of enjoying life and expiriencing the world around you, then I would consider your life wasted.  I'd rather go to Ireland and have to work an extra year to pay for it than retire a year earlier.


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## bushidomartialarts (Jun 22, 2007)

Be willing to work hard for a set period of time.
Have the personal discipline to live within your means, including savings budget.

Everything else is details.


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## Carol (Jun 22, 2007)

For me its doing what I love and loving what I do. 

I follow what my passions are...because it is when I am following my passion that I can achieve excellence.


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## Hawke (Jun 24, 2007)

I would like to thank everyone who has commented to my post.

Thank you very much.:asian:

Once a year people get together and talk about the future.

Here is a sample of TED (Technology, Entertainment, Design) talks:

Tony Robbins (22 minutes)





I hope this thread keeps growing.  We stand on the shoulders of giants of people that paved the way for us.  I hope we can benefit by helping others so they will have enough to live and enjoy their life, the lives of their loved ones, and lift others along the way.

Cheers!


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## MA-Caver (Jun 24, 2007)

Ping made some great comments about what's the purpose of having money if you don't spend it. This is one of the minor flaws I see in those multi-millionaire types who say don't spend your money (any more than necessary) and it'll accumulate into mass wealth. These are the guys that live in 20K to 50K sq foot homes. 
I've known a number of millionaires and they've taught me some good lessons to think about. 
1 family I knew came from a very poor home. The father was abusive and eventually the mother got sick and tired of it and divorced him successfully and remarried a man who was becoming in _every_ _sense_ of the word a "self-made millionaire". Now they live in a 10,000 sq foot home worth over 4 million dollars and their annual income averages about a million net. They treat money like a tool. A means to get what they want. When I was hanging out with their sons the boys would go up to their mom and say: "we're going out to do (whatever) and I need some money for gas and dinner and whatever" ... Mom would ask them how much they had on them and they answer (truthfully) and she would go into her purse and lay out anywhere between 200 to 400 in cash and tell them to be careful and have a good time. 
I talked to both parent and the kids about it (individually) ... the kid's response was surprisingly sensible. "Mom just wants to make sure we have enough to get whatever we need and if we get in to trouble (i.e. car, legal) that we have the cash necessary to help us out"  Mom's answer was along those same lines and that she just loved her boys and trusts them not to get into anything over their heads but to make sure that they don't have to make two trips (back home and to the store again) to get what they want, or that they have the cash right there to take care of whatever (small) problems that they might find themselves in.  Money is a tool... nothing more. 

2. Another self-made millionaire. 10 million net annual income. Has a huge 28K sq foot home sitting on the edge of 40 acres of extremely prime real-estate bordering a national forest boundary, 8 cars (Ferrari's, Rolls, Bentley's, etc.), 2 busses (RV's) 4 planes and a seat on the NYSE. Asked him directly what was the secret of his success... he replied directly back (they like those questions)... "hard work and sensible spending." 

I've been poor for most of my adult/single life. Like Shesulsa I learned to live within my means and be happy with it. When I DO have money I'm careful but not so frugal that I don't deny myself what I want... I'll just delay it for a while and save up until I can buy it without hurting myself. There's always tomorrow and what-ever that I want _isn't_ going to be the last of it's kind. Nobody needs those kind of things anyway. 

It takes money to make money and that is a fact. Rarely does a person start out from bone bare scratch and becomes successful, their stories are remarkable and insprirational at best. Most of the successful people I've known have had some help somewhere along the way (bank or friend/family loan). Hard work, persistence and *believing in the dream* (whatever the hell it may be) paved the rest of the way. Some make it some don't. 

Right now, honestly, wealth to me doesn't mean money in the bank or my pocket or stuffed in my mattress. It's being happy and knowing I'm loved and that I have friends... a lot of friends. A number of them are here on MT. :asian:


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## Eternal White Belt (Jun 25, 2007)

Yeti said:


> I think #1 is a bit unrealistic. I don't know of many people who can purchase a car or a home without having to borrow money. I think a better way to phrase that is having only "good debt". There is such a thing as good vs. bad and while you do want to minimize your total debt, having some is not a bad thing. And actually, I think most lending institutions WANT you to have some type of debt (credit cards) as it establishes a credit history.


 
It's only unrealistic if you are used to thinking about running up huge amounts of debt.  I am currently looking for a "new" car, and I intend to pay cash in the amount of $2K.  Having done that, I can then save more money (by not enslaving myself to a lending institutuion) and pay cash for an even better car next year.

Good debt is an oxymoron.  Debt is bad.  Period.

Lending institutions who go by your FICO score, that is, they only look at how much debt you carry, should be avoided.  There are these things that work within some institutions known as 'people'.  If you can find one of these 'people' who can think for themselves, and talk to you as another 'person', you can most certainly get a loan, if you absolutely need it (such as for a house).  However, you should get it for the shortest term possible, and pay it off as quickly as possible.

Debt erodes wealth.  Debt does not build wealth.


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## Monadnock (Jun 25, 2007)

To be wealthy, you have to bring in more than you spend out. A lot more, by my definition of wealthy (which I am not).

I think to do that today, you must possess something people are willing to pay for, either a skill, or some type of property, or an invention/idea.

Working for the man doesn't usually cut it, unless you are in some professional field. Even then, dual income may have to be part of it.

I'd say set a deadline to become wealthy, or possess enough dough to retire happily. 401k's and safe long term investments may be part of that. Your primary residence is another. If you can pay it off in 20 instead of 30 yrs, that's a plus too. An extra mortgage payment a year can get you there.


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## michaeledward (Jun 25, 2007)

Eternal White Belt said:


> Good debt is an oxymoron. Debt is bad. Period.
> 
> Debt erodes wealth. Debt does not build wealth.


 
With this, I disagree. I believe a college education will significantly contribute to one's income side of the equation. And, college education is rapidly becoming the most expensive investment one will make.  

It is unrealistic to think that you can pay cash for this asset. While you may be able to save a couple of grand to buy a car every few years, using the same tactic in education (pay for each class in cash, as you go) would extend the process over too many years to realize a benefit. 

I believe college loans are a good reason to enter into debt. (Assuming you complete a degree program). 

Real Estate is usually an appreciating asset. The value of a home tends to increase over time. Accepting some debt to acquire real estate can be a good thing. 

Additionally, because of the current structure of our economy, one dollar, ten years from now, will be easier to acquire and worth less, than one dollar today. If I can pay for an asset with dollars in the future, it is less of a burden than paying for an asset with dollars today.

Being aware of these facts, and realistic about how to acquire assets can present us with examples of "good debt".


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## Kacey (Jun 25, 2007)

I agree with the definitions given of good vs. bad debt - with education and real estate debt being prime examples of good debt.

I own a house... okay, the bank owns my house at the moment, but nonetheless... I was able to purchase my house only because I was in the financial position to acquire that type of debt.  There is no way in hell I could have saved enough money - while paying rent - to buy a house.  I started with a condominium through a first time buyer's program, for $3000 down, and then I lived in it for 6 years, while it appreciated and I paid the mortgage - easy enough, at the time, because the mortgage payment, even with the association fee, was less than I'd been paying in rent, and I used the difference between the mortgage payment and the rent I'd been paying to make improvements in the condo, which added to its value.  At a time when it was a buyer's market in houses, but a seller's marker in condos, I sold the condo and bought a house.  Now, I'm not paying the house down as quickly as the condo - the difference in the payments is too great - but on the other hand, I haven't paid rent in 10 years; instead, my housing payments have gone to an appreciating asset, which is tax deductible as well, with the goal of having the house paid off before I retire, greatly reducing my need for retirement income.  On top of all that, my housing payment is relatively stable over time, and, as my income increases, is a shrinking portion of my income.

If I were to believe that _all_ debt erodes wealth, I'd still be paying rent, which would increase, rather than remain steady, over time.  All debt is _not_ created equal - but while having housing debt does not particularly bother me, I avoid short-term debt - especially credit cards - like the plague.  I _have _credit cards, but I only use them for emergencies, until I can get the money out of my emergency fund, which is carefully set up to _not_ be immediately accessible, so I don't use it indiscriminately.


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## Eternal White Belt (Jun 25, 2007)

michaeledward said:


> I believe a college education will significantly contribute to one's income side of the equation. And, college education is rapidly becoming the most expensive investment one will make.
> 
> It is unrealistic to think that you can pay cash for this asset.
> 
> ...


 
Which is why I said - if you MUST acquire debt, pay it off as quickly as possible.

It is not unrealistic to pay for an education with cash.  All it takes is a little planning and investing.  More and more people are paying cash for their purchases these days.  Just take a listen to Dave Ramsey's radio program.  I only get to listen for about 20 minutes on my way home from work, but there are at least one or two people every day who call in to tell Dave they are DEBT FREE (may or may not include the house).  Check out his radio program, or read The _Total Money Makeover_ and _Financial Peace_.  Dave's kool-aid be goooooood! :ultracool


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## Rich Parsons (Jun 25, 2007)

Hawke said:


> Greetings All,
> 
> What do you think is a formula to wealth? (assuming you didn't win the lottery, your not a trust fund baby, and nobody you know is wealthy).
> 
> ...





Here is my Plan take it for what it is. 

1) I max out my 401k.
2) I carry only the minimum debt i.e. house and vehicles - No credit cards
3) I maintain a spreadsheet (* when I started the pre-made ones did not do what I wanted *). The Spreadsheet  covers everything my check and all the taxes I pay and inputed income to my cas expenses. I even break out my cash expenses to where I spend it, such as lunch money or gas (* use a credit card that gives good discount now and pay off monthly *) and going out. I do it by the day of the week to keep track if I have a spenidng habit issue. I also keep track on money spent on martial arts. 
4) I pay myself a reward for saving. I will occasionally buy a pizza or set up to buy something nice such as a gun or some other toy. 
5) I spend money on what makes me happy
6) My furniture is used.
7) My TV is from 1981.
8) I have Cable (* I really like sci-fi and others while I am sick and cannot read while on cold medicines. *) Also for internet.
9) I do not have an iPod
10) I do not have all the latest technology - yet others could as it might be what makes them happy. For me it is martial arts and my convertible and motorcycle
11) I went to school to have a job that pays well. 
12) I work hard to maintain that position to maintain the income and the above plans
13) I shop well - meaning I look for stuff that lasts and is at a good price
14) I ask family for clothes as well as this is useful items for me and I do not have to spend the time and money buying it myself. To me it really is a great gift even though some think it is boring. 


It is good to have a plan. 

It is good to be able to execute that plan otherwise the plan is no good for you.

Start small for if you do not start it will never happen. i.e. take half of your raise for saving and the rest to reward yourself. After a couple of years this will give you a few percentage points into your 401K or IRA's. 

What gets me as stated by others are those that have no money, but have the newest shoes and clothes and go to the bar a couple of times a week and the coffee shops ..., . 

The phrases "I have to have ..." or "We Need ... "Just look at how much money I have saved ..." (* This said after buying lots of stuff you will never use on sale. And yes this did happen me *)

The Big Divorce is horrible for credit and assets, but I am recovering, so if one is serious it should be accomplishable. 

Good Luck


PS: There was a study about education levels and the amount money spent on the lottery. The higher the education the lower amount spent.   NOTE: I will spend some sometimes for group stuff at work or when it is outrageously high. A dollar or two once or twice a year.


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## Hawke (Jun 28, 2007)

Here are some books I thought are worth mentioning with links to Amazon so you can get more info:


The Richest Man in Babylon
 by George S. Clasen


The Greatest Salesman in the World
 bu Og Mandino


Unlimited Power
 by Anothy Robbins


Think and Grow Rich
 bu Napolean Hill


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## hong kong fooey (Jun 28, 2007)

myself I would go for the college education. nowadays it's really hard to get a good paying job unless you have a degree at least thats what it seems to me. for instince right now I work for 8.50 a hour if I had gone to college I would be making a whole lot more


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