Posts filed under 'Wealth'
Following up on my Micro Life Organizer (MiLO), I am pleased to announce my Financial Life Organizer (FiLO) for your consideration.
Over the last few months I’ve been reading numerous books on building wealth, and one of the core themes running throughout all of these books has been; if you don’t track your spending, you’ll spend to much. If you spend to much, and have a “high consumption” lifestyle, you’ll never be wealthy.
Since I’m not counting on winning the PowerBall lottery anytime soon, and no one in my family will be leaving anything behind when they shuffle off their mortal coil, I decided I needed a better way to track my spending.
Keeping track of checks and credit card expenses isn’t completely difficult in this day of on-line banking and instant account checking. But I find that I don’t check these tools on a daily basis. At best I check them weekly, and I can spend a surprisingly large amount of money in a week if I’m not careful! And forget about tracking cash - if I have $20 in my pocket there is no way on God’s green Earth that I’ll remember what the heck I spend it on 24 hours after it’s gone.
Given my lack of a fortune coming at the hands of the lottery or a distance, but insanely rich great-great-aunt, and my lack of discipline to capture my monetary transactions in all their various places on a daily basis; I knew I needed a better solution. So I sat down and created FiLO.
The essence of a FiLO is a cash, check and credit card register that folds neatly into a 2.75″ x 4.25″ booklet that you can stick in your pocket or carry in your wallet. The goal is to make sure I never have an excuse to not record a financial transaction.
And I figured if I find FiLO useful, other people might too…people like you!
Of course, you want to see what FiLO looks like; in terms of form if looks exactly like MiLO.
When FiLO is folded, it’s only a bit bigger than a credit card and gives you seven pages to track your financial transactions. The back page is a “Get Excited & Motivated” page and shows you how even saving a tiny bit of money, but doing it on a regular basis, can make you wealthy in your lifetime!
FiLO is free for you to use and pass around to anyone you think would get benefit from it. Here’s where to download it:
PLEASE NOTE: If you’re printing this PDF with Windows, make sure to select “Page Scaling = None” on the print options when you print out a FiLO or Acrobat Reader will shrink the FiLO down by a few percent and it will not fold properly. This is one of the biggest frustrations people using Windows will have printing out a FiLO for themselves.
I hope you enjoy using your FiLO, and I hope it can help you keep closer tabs on your spending. Good luck and good wealth!
February 14th, 2006
Okay admit it - statistically speaking - you have credit card debt.
The average American household carries $8562 in credit card debt! A lot of people who carry credit card debt are also only making the minimum payment towards their balance. If you carry the statistical average balance, and make the average minimum payment, and never charge another dime; it would take you almost four and a half years to pay off your balance.
I’m no different; I have credit card debt that I’m carrying too. Thankfully, I’m not carrying the average $8562 in debt, but I’m carrying more than zero which means I’m not being financially efficient.
All along I’ve given myself credit for paying over my minimum balance and making some progress towards paying off my debt. I took the approach of spreading my payments around and covering each card with about an equal payment each month. But I will still unhappy with how long I had projected it would take me to pay off the last of my balances. I wanted to find a better way to handle getting rid of my credit card debt.
I found an interesting method in David Bach’s book The Automatic Millionaire. He calls it the “DOLP” or Dead On Last Payment plan; it’s very simple to put into place.
1) First, you create a “DOLP” number for each of the credit cards on which you are carrying a balance. To figure out that card’s DOLP number divide the balance by the monthly minimum payment. If you have a Visa card with a balance of $2300 and a minimum payment of $50, its DOLP number would be 2300 / 50 = 46.
Get DOLP numbers for all the cards with a balance. You can use Excel to make a nice and neat list, plus Excel can handle all of your calculations for you.
2) Once you have all of your DOLP numbers, rank and list them from lowest to highest. Enter this information into Excel or write it on a piece of paper. For example:
3) Next pay the card with the lowest DOLP number first, while making minimum payments on your other cards. If you normally spend $250 per month on credit card payments, in the example above you would pay the minimum monthly payments to Capital One, Discover, and Earl’s Bank - $95 in total - and you would apply the balance of your $250 towards your card with the lowest DOLP number (in this case $155 per month to Citi).
4) When the last payment has been made to a card you cancel it. If you feel like you just can’t cancel the card, freeze it into a block of ice and make it almost impossible to get to it.
Now drop down to your card with the next lowest DOLP number and apply the balance to that card. In the example above you would now be paying $170 each month to Capital One while paying the minimum monthly payment to Discover and Earl’s Bank.
5) As you pay off your balances, you drop all of the money (less the minimum payments) you spend each month to settle your debt down to the next card. You’ll be paying them off faster.
When I first read this I thought it was an interesting idea, but I didn’t know if it was a better way to manage my money than my way - spreading my money all around. So I turned back to Excel to crunch some numbers.
I calculated that if I follow the DOLP plan, I can accelerate paying off my credit cards by more than six months. This is because some of my lower balance cards with a lower DOLP number have higher interest rates. So I’ll be paying those off faster and paying less money overall in interest charges.
If you do use Excel to calculate all of these numbers; here is a handy formula to know. It will calculate for you the number of payments you have left for a given balance, interest rate and monthly payment.
The formula is: =NPER(A/12, B, -C)
For each of the values, A, B and C:
A = Annual Interest rate (APR). The formula divides this number by 12 to get your monthly rate.
B = The amount of your monthly payment.
C = The principal balance. We make this number negative so we will end up with a positive number as the result.
Once you have an Excel spreadsheet setup with this formula you can use it for “what if” scenarios. You can adjust your payment and see how it affects the time required to repay your account. You can adjust your interest rate to see how it will affect the time required to repay your account (call your credit card and ask if they will lower your interest rate, many will just with a phone call).
You can also use it for goal setting. You can set a goal to have an account paid of in a certain number of months and using this Excel spreadsheet you can adjust your monthly payment until you achieve a number that will let you reach you goal.
In the example above, if my goal were - in six months - to pay off a balance of $3822 at 14.99% annual interest, I would need to make a monthly payment of $665.
If you’re carrying credit card debt it’s time to “DOLP” it out of existence! It’s easy to calculate your debt’s DOLP number and put together a plan to knock it out.
Remember, a little “DOLP” will do ya!
January 31st, 2006
Scott Ginsberg of “HELLO…my name is Scott” has a free eBook available titled, “66 Priceless Pieces of Business Advice I Couldn’t Live Without.” One of his pieces of advice is, “Give value first.”
I think this is one of the most overlooked, but vital pieces of advice out there. How often have you heard someone complain they’re not paid enough or they didn’t receive a large enough raise?
I don’t know about you, but I hear things like this from people all the time.
Every time I hear someone say they’re not paid enough money for a job I want to ask them what value they’re providing. I’ve found there is usually a correlation between the value someone provides and their compensation; and most people are completely oblivious to this correlation.
On which side of the chart do you fall? The relationship of value-to-income is not a straight 1-to-1 ratio like most people think. There are a few reasons for this:
- value can be a vaguely defined quantity in a relationship
- most people want to see proof of value before they’ll determine (and pay) a price
- intangible factors can affect the worth of your value
Usually the relationship - when plotted on a graph - is a logarithmic curve. When you’re first starting to offer value, you have a lower income (or return on your value).
Once you’ve proven yourself, your product, your service - whatever you need to prove - your income rises. As you provide more and more value, the amount of income relative to your value will increase logarithmically.
This means you will eventually get to a point where your income and value are maximized. Whether we work for someone else or are self-employed, this point of maximum value and maximum income is where we all want to get in our professional lives.
But the “gotcha” of a logarithmic relationship is that when you’re first starting out you have to put more effort and energy into one axis of the relationship to generate output on the other. You have to initially provide more value from which you receive less income.
If your first effort is to maximize your income, you had better have the perfect value proposition. It’s not impossible to do, but it’s extremely difficult.
If you change your perspective just a little and focus not on your result (the income), but on your effort (the value) something special starts to happen; you will notice that the relationships around you are built better, on my solid foundations. You will notice that you care more about providing a better quality product for your customer. You will become input-focused rather than output-focused.
You will be building value first and trusting that income will follow. If you take this approach to life and your business relationships (and even personal relationships) you’ll always come out ahead because income will eventually greatly reward value.
Remember the saying; “if you build a better mousetrap the world will beat a path to your door.” The path doesn’t get beaten to your door because you’ve cornered the market on mouse catching, but rather because you’ve provided great value to people in the form of a better trap.
If you’re like most people, at this point you might be asking yourself, “If I provide all this value up front aren’t I taking a risk on the payback?”
Yes you are. But all of life involves some risk. The proposition is this; prove yourself first and be rewarded. It’s very possible you’ll run into someone who wants to take advantage of you. When this happens you have to learn to quickly trust your gut when starting to deal with someone in a new relationship.
And remember, value is a two-way street; if you’re giving but never getting, you’re free to change the relationship!
When you commit yourself to providing value first, you’ll be more likely to create “win-win” solutions in your relationships. Keep this advice close to your heart, put it in practice everyday and you’ll soon see returns on your value that you never predicted!
January 27th, 2006
Are you a high-wage earner and a big spender? Do you have a “consume” lifestyle? Do you have a lot of material high-status symbols?
If you answered yes to these questions you might be an under-accumulator of wealth (a U.A.W.) and not a prodigious-accumulator of wealth (a P.A.W.). So how do you know if you’re a P.A.W. or a U.A.W., and if you find yourself in the U.A.W. group what can you do about it?
These are questions posed and answered in the book “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko.
To answer this question for yourself - “Am I a U.A.W. or a P.A.W.?” - here is a simple rule of thumb you can use:
- Write down your total pre-tax income, including any investment dividends or assets that produce income.
- Take this number and multiply it by your age.
- Take the total and divide it by 10.
For example; a 41 year old executive who earns $103,000 would end up with an answer of “41 x 103,000 = 4,223,000 / 10 = 422,300″
This number is roughly what your net-worth should be for your age and income. We should expect our executive to have a net-worth of roughly $422,300.00. If our executive’s net-worth was significantly less than this number, he would be a U.A.W. - an under-accumulator of wealth. If our executive’s net-worth was more than double this number, he would be a P.A.W. - a prodigious-accumulator or wealth.
How do you measure up?
I must admit that I was shocked when I ran the numbers for myself - I knew I wouldn’t call myself “financially independent,” but I wouldn’t have figured that I would be as far below the target to be on my way to financial independence as I was.
Stanley and Danko define financial independence as the ability to live on ones wealth - our net-worth - for ten or more years.
I suspect that we all want financial independence - it’s many people’s “ultimate life goal”, but most of us don’t plan for and work towards this end. The authors argue that the biggest culprit that prevents people from achieving their goal of financial independence is living a high-consumption lifestyle.
I know I certainly do! I’m a “stuff” freak - I love my gadgets and electronic gizmos. My wife and I enjoy a very comfortable lifestyle that includes almost any consumer item within reason. We eat at restaurants quite often. We’re living the high-consumption lifestyle and are not on track to achieve financial independence without making some changes to the way we work, earn, save and build wealth.
The keys to achieving financial independence are four-fold:
1) Live on less than you earn. The majority of individuals with a net-worth of over a million dollars save and invest - on average - 15% of their pre-tax income. This requires giving up some of a consumption-based lifestyle for one of saving and investing.
2) Budget, budget, budget. About 83% of millionaire households create a budget for their income and expenses, conversely only about 16% of non-millionaire households create a budget.
3) Invest in what you know. Everyone is knowledgeable about specific subject matter; take advantage of this knowledge when looking for investments!
4) Seek professional advice. Realize when you’re not the most qualified to create an action plan to achieve your goals. Millionaires seek out professional help from tax accountants, CPAs, and financial planners far more than non-millionaires.
None of these keys is new or sensational information; you and I already know this! But seeing all of the steps laid out and presented in “The Millionaire Next Door” is very helpful. It breaks the problem of “how do I get started and what do I do?” down into manageable chunks; this helps prevent the getting-overwhelmed-factor.
I know that as I move down the list I can put a check mark in the “I don’t do that” column next to each of the four keys above. Just like many people, when my income increases, my spending increases. I was living comfortably on a lesser amount prior to my income increasing, so why didn’t the increase go directly into investments and savings? The mentality of a U.A.W. is to consume more as his means go up; this is the habit that needs to be broken.
“The Millionaire Next Door” will help you change your thinking about high net-worth individuals as well as give some good advice to help you change your habits. It’s shaken me up and forced me to look at how I earn and how I consume.
In addition, “The Millionaire Next Door” is filled with insightful and interesting information about high net-worth individuals. Did you know that the average millionaire spent an average of $267 on his watch and less than $600 on his most expensive suit?
Did you know that the average millionaire is more likely to hold a Sears or J.C. Penny credit card than an American Express card?
Did you know that 80% of all individuals with a net-worth of one million or more dollars built their wealth in a single generation? Only 20% of millionaires received their money through inheritance.
I highly recommend you pickup this book and spend time reading it. It’s well written, and refreshing because it doesn’t promise you “riches in 3 easy steps.” It’s good, solid advice.
January 23rd, 2006
I really hate pushy salesmen - the ones who use high-pressure tactics and try to “hard sell” me. Because of salespeople like that I always wanted to distance myself from sales. I never thought of myself as a salesman, and when I did have to wear that hat as a business owner I always tried to let my product do the work for me. I didn’t like “selling.”
But as I got a little older, I came to realize that the old saying, “Everyone in this company is in sales!” isn’t true. The saying should just be, “Everyone is in sales!”
Everyone is selling all the time. If you want to go to Outback and your friend wants to go to Red Lobster, one of you will be sold. When you meet new people you’re going to have to sell your personality. When you want a new job you’re going to have to sell your potential employer on your skills and experience. Everyone is always selling…always.
And what is the number one question you’re asked across all facets of your life? The number one question that starts all the selling in the first place? That question is; “So, what do you do?”
That’s the lead-in question asked when introduced to new people in social settings. That’s the lead-in question asked when you meet new people at business conventions. It’s the lead-in question people ask. And it gives you a perfect opportunity to sell without selling. It gives you an opening to present your “30 second commercial” to get their attention.
Why do you want a 30 second commercial? What will it do for you? How do you write one? Great questions! Let’s start with why you want to have a polished 30 second commercial ready to go when meeting new people.
Why 30 seconds?
Studies show that most people form their first impression of you within the first thirty seconds of meeting you, and first impressions are tough to change. So you want to keep your introduction short - enough to pique their interest without boring them.
If you’re brief, articulate and present some interesting “pain hooks” in your introduction, they’ll ask questions and keep the conversation moving along. They’ll also likely create a favorable impression of you as someone who’s “with it” and “put together.” In business, this can make or break a relationship.
What will a 30 second commercial do for you?
If you’re well rehearsed you will appear extremely confident and poised. You can sum up yourself and your product or service in just a few sentences, many people just ramble on and on and on and on - boring! Even if you’re not feeling particularly sophisticated and confident, this is the appearance you’ll give to others.
It’s also a great way to present your services (or your company’s services) in a way that’s easy for the other person to absorb, digest and respond to. You’ll give them two or three things that can prompt further discussion. If you’ve done your job well, the other person won’t be left scratching their head at your response, while an awkward silence lingers between the both of you.
Your goal should be to give them enough information to keep the conversation flowing smoothly and to make them want to get to know you better.
How do you write a 30 second commercial?
As promised, here are five easy steps to use when creating your 30 second commercial:
1) Start by creating five or six “pain hooks” to use as a starting point. A pain hook is designed to elicit a pain response from your listener (emotionally). It should make them reflect on some business or personal pain they’re currently experiencing.
We try harder to avoid and move away from pain. This drive to avoid pain is much stronger than our drive to find pleasure. If someone has a business pain, your pain hook should make them think about that pain and show them how you can solve their pain.
2) Once you have your pain hooks, you need to find the thing you do that can solve all of them. You might have multiple ways of solving the problems, but you have to make sure you can solve the problem.
3) Pick your top three pain hooks - the strongest ones - these will be the base of your 30 second commercial. These should be the pain hooks that the people you meet most likely encounter.
4) Work your pain hooks into a professional sounding sound-bite and write it out. Keep it shorter than you think you should, when spoken it will take you longer than you think to say everything and you don’t want to sound rushed.
5) Rehearse your 30 second commercial until it feels and sounds natural, and rolling it off your tongue is second nature. You don’t want to sound like you’re reciting a memorized script - you should ad-lib as needed and adjust it to the people you’re presenting your 30 second commercial. Be loose, be fun, but be prepared.
You should get into the practice of using your 30 second commercial whenever you meet new people; they will inevitably ask, “So, what do you do?”
Five years ago I ran an Internet company. We sold dial-up, high-speed, web hosting, web design, application design, and more. Our informal motto was, “If it touches the Internet, we do it.” Of course, most people are not highly technical, and lots of buzz words would make their eyes glaze right over. So I had to have a good 30 second commercial to not confuse people when telling them what we did.
My 30 second commercial sounded something like this:
I own Qserve Internet. We’re a small Internet company and we service both home and business users. A lot of our customers like us because we don’t have busy signals. Others like us for our reasonable web-hosting rates. But I think our biggest advantage is our commitment to quality. We work to maintain a high level of quality so when you do get connected, you stay connected! Plus when you call us, you always talk to a real, live person, not a machine.
In my 30 second commercial I had 4 pain hooks; they were:
“No busy signals” - Our geographic area in the late 1990s experienced an explosion in Internet usage. A lot of the local Internet companies couldn’t keep up with the growth, and busy signals were common. We always worked hard to keep our user-per-line ratio favorable without generating busy signals. It was a metric we monitored like a hawk, and while we didn’t “guarantee” no busy signals, we rarely had them. It was one of the main reasons our referral business was so good.
“Competitive web-hosting rates” - At the start of the Internet explosion web hosting rates in our area were sky-high. As competition came to town the prices came down, but there were a lot of places where the price was much higher than average. We focused on being competitive, but offering a good deal for our customers. We had a lot of customers who moved their web site to our company for this reason.
“Staying connected” - Being in a Midwestern state, we had a lot of rural areas we served. We invested heavily with the phone company to have all digital lines back to our main data center. We had a very good reputation for keeping calls connected, while our competition was only “so-so” at this. It was a big pain-point for a lot of people in our area, and solving it won us a lot of business and a lot of accounts.
“Talk to a real person” - We always answered the phone. We believed that it made a difference since our biggest (and bigger) competitors used auto-answer phone systems. Over the years we received a lot of compliments, email and letters from our customers because of this. We also got a lot of business, and it was not uncommon to get an account solely because we were one of the only companies in town who answered their phones.
I would also tailor my message depending on who I was speaking with. If I was talking to someone on the street, I would emphasis home-service pain hooks and mention business pain hooks. If I was in a networking group, or a business meeting, I would emphasize our business pain hooks and depending on the group I might not even mention home service at all.
The key though was that I was prepared with a handful of pain hooks that I could use. I was also rehearsed and I practiced my 30 second commercial often enough that I sounded very natural, confident and “put together.”
Today I work in an entirely different industry, and I have an all new 30 second commercial. My position isn’t directly involved in sales, but I still use my 30 second commercial and work in pain hooks when answering that oft-asked question, “What do you do?”
I challenge you to create a 30 second commercial for yourself. It might not land you that million-dollar account, but it will certainly make you stand out, sound poised, confident and in control to everyone with whom you’re introduced!
January 9th, 2006
How much are you worth? How much is your time worth? If you’re like most people, I can guarantee you think and act like your time is worth less than it really is; in some cases much less.
When I ask, “What are you worth?” I don’t mean net worth (which is important). I mean, how do you value yourself and how do you perceive the value you add to the relationships you’re in?
If you earn $75,000 a year and you’re being compensated for a 40 hour week, your time is worth $36.06 per hour. If you didn’t add at least $36 per hour in value to your business relationships, you probably wouldn’t stay employed for long.
But do you think of your worth in terms of dollars and cents on a daily or hourly basis? If you don’t, why not? Lawyers sure do, doctors too. Good businessmen and executives know their worth - their value - to the penny, and so should you. Why? Good question!
Consider this scenario; you’ve put in a hard week working (your value is $36 per hour remember?) and you’re ready to relax on a beautiful, sunny Saturday. Right about the time you open a frosty beverage and sit down to relax your wife reminds you that the yard needs to be cut. It takes about two hours to cut, trim and rake the yard; you would rather be golfing or fishing or napping - anything else - on this beautiful, sunny, warm Saturday afternoon. You know the neighbor has a kid who will cut the yard for $30 - should you pay him?
If you know what value you bring ($36 per hour), you can make a much better evaluation as to whether this is a good value. In the scenario above, it would take you two hours to cut the yard; that’s worth $72 of your time. You can get the job done for $30. If you value your time, it might be a good investment to pay to have the yard cut unless you really enjoy cutting grass.
This is a simple example to be sure, but think if you could use that time to generate extra income, or improve yourself a bit more. If you could “earn” your value while paying to have the yard cut, you would be $42 ahead. This is a powerful way to maximize your time and your value.
Knowing your worth is also extremely helpful when you have to make decisions about committing your time to projects. If you have a firm understanding of your value, when someone asks you to take on extra projects at work, or clients ask for more of your time, or your community center wants you to chair an event you can ask yourself, “Knowing my value is $X - is this a good and worthwhile use of my time?”
If you can’t answer “yes” to that question, or it’s not a task or cause you feel extremely positive about helping, it might be better to graciously pass on the offer.
If you don’t know your value, you can’t make an assessment like this; you will likely get stuck with another project or involved in another group from which you may not find (or provide) value.
You can also use your understanding of your value, to steer your behavior. An excellent exercise is to ask, “If I were worth $300 per hour, how would I behave?” Using the power of visualization, you can create a state where you do earn $300 (or $500, or $1000) dollars per hour - you can visualize you’re earning like a high-end New York attorney - and you can visualize how you might behave if your value were at this much higher level.
This gets you more comfortable thinking about money and larger sums of money. The ultimate goal of your visualization is to get yourself to feel completely comfortable believing that you do bring a value of $300 per hour (or more) to your business dealings. It’s a new concept for many people to think this way, and it’s usually uncomfortable to start thinking of yourself providing this level of value. If you don’t feel comfortable, you won’t believe in yourself; and if you don’t believe in yourself - that you truly do provide this high level of value - you won’t be successful; it becomes a limiting belief. Remember the words of Henry Ford; “If you think you can do a thing or think you can’t do a thing, you’re right.”
- The first step is becoming aware of what your value is today, and use that knowledge to steer your decisions.
- The second step is to get yourself comfortable with the idea that you provide a much higher level of value. Use the power of visualization to practice this and set a high goal for yourself; try for at least 10 times what your “today” value is, really stretch your visualization muscles!
- The last step is to truly believe you are worth this much higher value, and that you do provide this level of value. When you really believe this, it’s not difficult to earn $300 per hour, or $1000 per hour, or even $10,000 per hour. Consider real-estate; it’s possible for almost anyone to buy real-estate and sell it for a profit. All it takes is research on which piece of real-estate to buy. If you figure out your value for a transaction like this, it’s very possible your worth will be several hundred dollars per hour.
When you’re aware of your worth - and you use the power that knowledge brings - you can increase your worth. When you visualize a worth you want to obtain, you can learn and condition yourself to act (today) as if you do bring a higher value to your interactions with people. This will - in fact - lead you to actually having a higher value in your mind and in others’ minds. Once you open you mind to such possibilities, it’s freed and ready to help fill in the detail of how to make it happen.
But only if you know what you’re worth!
December 26th, 2005
My primary goal in starting this web site was to create articles to help people and to share ideas about success, passion, personal development, purpose and goals. My primary goal was not to generate money from the web site or to make a quick buck. A secondary goal was to create a vehicle that provides passive income which would eventually provide for my time to write these articles.
Passive income - income that generates itself for you - is a very powerful path to wealth.
After working on this web site for less than a month I’ve finally earned my first dollar with the on-line advertising. Sure a dollar isn’t much - it won’t even buy a large coffee at Starbucks - but it’s income that my efforts here have generated. It is also income that will continue to be generated long after these articles have been written. Hopefully you get excellent value and insight from this web site - that’s my primary motivation - and in return I’m hoping that as traffic to this site grows it will generate more passive income to allow me to create more content.
Throughout life you have to be aware of how you can build passive income streams. You have to keep yourself open to the potential opportunities around you everywhere. You also have to be willing to pay the price required to create the income stream (in my case, creating articles to provide you value, and keeping in mind the primary goal of inspiring people).
I want to sincerely thank everyone that has read the site so far. My pledge to you will be to continue to write what I hope will be insightful, useful, inspiring articles covering topics like passion, productivity, goals, improvement, time management and more. I also hope I can help inspire you to seek out and successfully find your own passive income streams. Please keep reading, and I’ll keep writing!
December 24th, 2005
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