I found this Fool.Com article about Warren Buffett, one of the richest guys in the World, interesting. I did so because of his first rule of investing - "DON'T LOSE MONEY".
It sounds simple enough, but it is in reality harder than it looks.
Now I am not one of the richest guys in the World. In fact, I am probably closer to the other end of the spectrum. But, I found while practicing law that the same principal for long term success applies. It is one thing not to make money, or to have a bad month in this regard, but to lose money leaves to you the task later of digging yourself out of a hole -- often a big hole. When you should have recovered and should be enjoying the fruits of your labor, you are busy earning money to cover the money you lost. It can, and often does, result in an endless cycle of borrowing and paying back.
Part of the equation is to not bite off more than you can chew in the first place. Most new attorneys going out on their own want to bulk up quickly. They burn through credit cards, lines of credit, money from parents, the spouses income, and everything else on which they can get their hands. They do not realize that life and income often get better with time, but that the real rule is produce earning and not debt. Besides, it is just so unnecessary to debt yourself into the practice of law.
This is the reason that newbies lay down money for office space, new desks, staff, phone systems, and advertising. It is not as much for the prospect of hitting it rich, as it is to fan the ego into thinking that you are right and will make it rich one day.
I get tired of seeing lawyers struggle financially. I use to practice bankruptcy law and I put a good number of lawyers in bankruptcy. I have seen a good number of lawyers disbarred. The genesis of this is always the belief you must shoot for the stars at all costs and without delay.
I have fallen for the trap, and so I know. The lawyer mistakes the number of cases or clients, the space around him or her, the car driven, the mug in the phone book, the number of associates and staff, for success. It simply is not.
You can lose every single one of these frills today and still survive -- and thrive. I know because I have done this as well.
The key is never to lose money. It is the rule I wish I had learned out of law school. When you enter into a lease you do not really need, you hire a staff person you could really do without, you purchase office furniture that is unnecessary if you had done it right, you are losing money. How is that? It is a debt. it might not be called a debt, but it is a debt. It is something that will stay with you for years. It will depress your earnings. It will drive you deeper into debt.
Look at everything around you and objectively ask what do you not need to make earnings (take home money)? How much money are you paying for staff, space, benefits, and all of the junk that goes with it? More important, where is the money to pay for this stuff really coming from? If you lost it all today, could you still operate and make a living? In most instances the answer is yes, and therein lies the problem. You are working for others and not for yourself. In reality the associate at Big Law has more autonomy than you because all he or she has to worry about how many hours he or she bills and collects. You, on the other hand, are driven only to pay the rent, the staff, the computers, the advertising expenses,the bills, and for all of the paraphernalia you bought or for which you obligated yourself. You are mainly feeding everybody but yourself. You allow the World around you to gorge while you starve.
If you find yourself in this boat I seriously suggest you think about losing it all tomorrow. Look, we all know the reality is that we eat what we kill, but the problem is that you are having to kill too much and to give the kill first to all but you and your family. You have to first let all of the predators eat to their fill before you and yours are allowed to lick the bones. The goal is to kill less and to keep more of what you kill.
The solution is to move home, or to move to a minimal environment. Rely on yourself. Downshift if you will. Use cheap tech and cut expenses to the bone. Spend no money you do not have to spend. The second rule is to understand the first rule - DO NOT LOSE MONEY!
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