The personal change process is harder than the process described in this book. Outside help is necessary. You deserve to have a happy investment life just as you deserve to have a happy relationship. To achieve personal change, you can commit yourself to a codependence treatment program, see a psychiatrist, take prescribed medication, go to a trained psychologist or therapist, attend group psychotherapy, commit to Gamblers Anonymous, and enlist the support of family, friends, and work colleagues.

But you must get help. You cannot fix yourself. You cannot use a broken tool to fix a broken tool. The input of trained professionals and those who have recovered is absolutely necessary.

For most of you, however, Step 1 is the entryway to your comfort zone.

You will notice that in this second stage there are no stocks, options, futures, metals, rare coins, or derivatives in the portfolio. And there is a good reason for that. When you have less than $100,000 to invest and less than a long time to get rich, you should focus on only two things:

1. Continuing to increase your income by continuing to perfect a financially valued skill such as selling, marketing, product development, or profit management

2. Investing the surplus in high-return equity ventures If you focus on this for a few years, chances are that you’ll end up with a surfeit of cash—that is, more cash than you need for your side business and real estate ventures. This extra cash should be kept safe. Extra safe. Remember, this is the beginning of your retirement nest egg. So place this surplus cash in bonds, and reinvest the interest in bonds, too. Make it a primary objective to have this safety reserve grow substantially every year. Once your bond savings become significant, you’ll start to appreciate what a valuable, comforting investment bonds can be.

It’s true. And you will probably never hear this from any other wealth-building “expert.” Unless you have more than $25,000 to invest, you probably shouldn’t be investing in individual stocks—and you definitely shouldn’t be trading options and futures.

The reason is simple: You want to get wealthy in 7 to 15 years— preferably in less than 7. There is no way that $25,000 can turn into something that even sounds like wealth in that amount of time— hough there are a lot of professional investment gurus who will tell you otherwise. In fact, there is a huge, multi-billion-dollar business that is determined to snow you on this issue.

Henry David Thoreau wasn’t an accountant when he said, “Simplify! Simplify!” but he captured the essence of balance sheet management. Keep it simple at first. Your accounting system will grow as your business grows.

Accrual accounting is used by all businesses of any size because it allows for better cash management, providing a better match between expenses and revenues, whether transactions are for cash or on credit. Without an accrual system, in fact, there’s no need for more complex accounting functions. It’s a way to better match revenues with the means for producing those revenues and gives a clearer picture of the actual profits your company makes.

In cash-based accounting, on the other hand, you record nothing until actual cash has traded hands. Whether you’re purchasing raw materials for manufacture from a vendor or selling finished goods to a distributor, nothing is entered in the ledger without a money transaction attached to it.

One of the best ways to approach the opportunity cost of debt is to consider your interest rates as “potential rates of return.” In other words, if you had to choose between putting $100 per month toward a savings account paying 2% and a credit card charging you 15%, you should pay down the credit card. Even though you won’t earn the 2% annually on your $100, you avoided paying 15% on the same amount. For the savings account to make more sense, it’d have to have a higher interest rate than your credit card. In short, this means paying off a 15% credit card is roughly equivalent to earning 15% on your money!

Opportunity cost is a concept from economics that states whenever you make a choice to do something, you are also making a choice not to do many other things. Oftentimes, those other choices had benefits attached to them that you will now miss out on because you chose another seemingly good option.

Great examples of opportunity costs in action can be found on any number of TV games shows like Who Wants to Be a Millionaire or Deal or No Deal. In these shows, a contestant has to make a tough choice between taking a sure thing like $25,000, or taking a chance of winning $1 million or going home broke. If you choose the $25,000, it costs you an opportunity to possibly leave with a million bucks. If you choose to roll the dice and you lose, you missed an opportunity at a guaranteed $25,000.

Everything in your personal finances has an opportunity cost. If you pay down your debt, you lose the opportunity to do all kinds of fun things with your extra cash, from spending it to investing it. However, if you pay down your debt, you’ll likely be debtand stress-free much sooner.

Although there are many benefits associated with loan workouts, they can suffer from drawbacks that make them unsuitable for all cases of corporate distress.

The principal problem is that they need all the participants affected by the terms of a workout to agree to its terms. This can create a ‘hold-out’ problem, whereby one or more disgruntled creditor can demand disproportionately preferential terms in exchange for their consent. Similarly, parties not necessarily directly affected by the loan workout, for example trade creditors, may seek to improve their position by taking, or threatening to take, legal action to recover their exposures to a company. This can undermine the entire process.

In addition, the structure of the creditor group in amulti-creditor workout can have a considerable impact on its effectiveness. The larger this group is, and the more divergent its interests are, the more difficult and time-consuming the process of developing a consensus is likely to be. For example, a loan workout involving a significant number of banks, purchasers of distressed debt, bondholders and shareholders, with each group potentially having conflicting objectives, may not be possible to agree without some form of recourse to the courts.

An increasingly competitive banking industry and a more critical focus on return on capital, is shortening the decision-making horizon. There is less willingness to become drawn into complex and time-consuming loan workouts. As a result, practices such as the sale of distressed debt are becoming more common. A more competitive environment for companies means that if their financial problems are publicised, it can have a severe impact on their prospects for survival. Increasingly stringent disclosure requirements, for example for stock exchange quoted companies, exacerbate this problem. All these factors contribute to considerable instability in a workout transaction. The diverse range of interests represented in a workout add to this instability. Consequently, the time available to develop and negotiate a restructuring is curtailed.